The professionals seeking out deals with lenders to avoid spotlight
Published 11/01/2014 | 02:30
FORMERLY wealthy professionals including judges, barristers, accountants and stockbrokers, are deploying intermediaries to cut informal debt deals with their banks and creditors to avoid Ireland's new public insolvency regime.
Sensitive borrowers such as solicitors and those working in financial services -- whose work is regulated by the Central Bank -- are under pressure to cut deals to avoid any impact on their careers including bankruptcy, fitness and probity inquiries as well as negative publicity associated with formal debt arrangements.
Many high net worth individuals (HNWIs) have encountered massive debt issues because they got involved in syndicated property deals they entered into on a joint and several basis -- meaning they are liable for the overall debt if they or another member of the syndicate falls behind in repayments.
But if these professional borrowers avail of options under the new Personal Insolvency Act 2012, details of their arrangements will be placed on a register maintained by the Insolvency Service of Ireland (ISI) -- leading to an increase in informal deals.
Last night, the ISI said that its presence had "acted as a catalyst in encouraging creditors and debtors to come together and do deals".
The ISI has come under intense scrutiny after Justice Minister Alan Shatter confirmed he is to change the new personal insolvency regime to make it more similar to the UK's Individual Voluntary Arrangement (IVAs), making it cheaper and less bureaucratic.
The Personal Insolvency Act 2012 was seen as a key element of the Government's strategy to help tens of thousands of people who are crippled with personal and mortgage debt.
But the ISI is to hold a conference next month for personal insolvency practitioners (Pips) to develop a protocol to streamline the process surrounding debt solutions and boost acceptance rates.
The ISI refused to be drawn on the number of applications it has received when pressed on the low uptake of solutions under the new law.
The agency said that "in the interests of confidentiality" it would not provide details or breakdowns of the numbers of applications received or being processed at this time.
Yesterday, Finance Minister Michael Noonan said that the biggest obstacle facing people trying to avail of Ireland's personal insolvency regime was the length of time it takes to resolve cases.
"The Minister for Justice has organised a meeting to see if a protocol could be put in place to get rid of a lot of the red tape.
"What he seems to have in mind is if you do four or five cases and there is something that keeps coming up and the same solution is being found well then you can apply that as a protocol solution across a whole range of applicants and you don't have to do every aspect of every case all the time," Mr Noonan said.