FF backs banks seeking cut in insolvency threshold to €1m
BANKS are making a last-ditch attempt to get the €3m limit for debts to be dealt with as part of the new personal-insolvency laws reduced to €1m.
The Bill is going through the Oireachtas at the moment. The IMF has supported calls for a €1m figure.
Around 15,000 people are expected to benefit from debt write-downs under the legislation, which is expected to be enacted by the end of the year.
They are expected to avail of new out-of-court debt-settlement arrangements.
The Bill will make provision for a personal insolvency arrangement (PIA). This is for mortgage debts and unsecured debts, such as credit-card loans.
This would include the residential mortgage and buy-to-lets and will cover debts of up to €3m.
Now Fianna Fail has joined the Irish Banking Federation in calling for the threshold to be lowered to €1m.
The party's justice spokesman Niall Collins said it was his understanding that the European Central Bank was set to join the IMF in calling for a lowering of the threshold to €1m.
He said the intention of a PIA was to keep people in their homes and entering into one would not mean that a person would be declared bankrupt.
Mr Collins pointed out that the average residential mortgage was between €200,000 and €250,000.
Even allowing for other unsecured debt and a buy-to-let, a €1m debt threshold would capture most ordinary people.
The Government had failed to convince anyone who questioned it as to why it needed to put a threshold as high as €3m into the Bill, said Mr Collins.
He claimed that there was now under way an attempt to bail out barristers in the Law Library who had borrowed heavily in order to invest in buy-to-lets.
A spokesman for the Department of Finance said the €3m figure was the appropriate one as an Oireachtas Committee had called for a €10m threshold.
He had no comment to make about claims that the €3m figure was chosen to bail out people who would be forced to lose their jobs if they took the bankruptcy route.
A spokesman for the Irish Banking Federation said the €3m figure was too high.