Four out of five bankrupts forced to give up family home
Published 26/04/2015 | 02:30
The vast majority of people who choose to go bankrupt lose their family home, new figures reveal.
The statistic dispels a commonly held notion that the family home is off-limits during bankruptcy proceedings.
The figures, compiled by the Irish Mortgage Holders Organisation, also show that many of the broad cross-section of struggling debtors who opted to go bankrupt in the past 12 months were young parents aged in their thirties and forties.
The IMHO advised around 100 clients on going bankrupt in the past 12 months, in many cases because their banks refused to accept deals on settling mortgage arrears.
An analysis of 50 of those cases, with combined debts of €17.8m, has shown the cross- section of people who are going for the "nuclear option" of bankruptcy.
It found that 39 of the 50 bankrupts stood to lose their family home, a ratio of around 80pc of those going through bankruptcy.
Most had already surrendered the property to the banks.
They are amongst the record numbers of people currently opting to go bankrupt in Ireland over unmanageable debts.
The 50 cases included a charity worker, a farmer, a hairdresser and several unemployed construction workers. Three were self-employed but had lost their businesses, and two were mothers who described themselves as "homemakers".
The youngest included an unemployed construction worker and a site manager, both of whom were aged 28. The oldest of the bankrupts were two people aged 63 and 64. Of the 50 cases, 38 were aged in their thirties and forties.
"The fact is that anyone who is thinking of going bankrupt needs to know it is an absolute last resort," Stephen Curtis, a personal insolvency practitioner with the IMHO, told the Sunday Independent.
"The myth that there is some sort of protection there for the family home is wrong."
He said the organisation, which does not charge fees, advised two main cohorts of people on bankruptcy.
The first were people in their thirties and forties who had bought standard houses for boom-time prices and who had since lost their jobs and could not make the repayments.
The second, smaller, group were people in their late fifties, and older, who had no chance of repaying the loans before their retirement.
The 100 bankruptcy cases that the IMHO advised on last year are amongst 448 bankruptcy cases adjudicated on in 2014.
The official court assignee in bankruptcy, Chris Lehane, has said he is receiving around 20 to 30 bankruptcy applications a week and that this could translate to 1,000 bankruptcy cases in 2015.
Part of the increase is due to a relaxation of the bankruptcy rules last year, by introducing a new three-year bankruptcy term as opposed to the 12-year term under the old rules.
The cost of going bankrupt has also dropped significantly from more than €1,000 to €270. The Labour Party is pushing a proposal to cut the bankruptcy period from three years to one.
However, Fine Gael is opposed to lowering the period, and the issue has sparked a major row between the Coalition partners as the Government prepares to release its plan to combat the mortgage-arrears crisis following the spring statement on the economy on Tuesday.
The former tycoon Sean Quinn walked away from debts of more than €1bn owed to the former Anglo Irish Bank when his bankruptcy ended in January, but he held on to his family home in Ballyconnell. Tom McFeeley, the rogue builder behind the firetrap Priory Hall complex, also went bankrupt but his family home was sold by Nama.
The bankruptcy process allows someone who can't pay their debts to transfer all their assets to the official assignee in bankruptcy to be sold to pay off the creditors. At the end of three years, any outstanding debt is written off.