Bankruptcy service to offer homeowners legal costs lifeline
A LOW-COST bankruptcy service is being launched by a group that works with struggling homeowners.
Up to 5,000 people are expected to be declared bankrupt in the coming year, following changes this week to the laws around the process.
Now the Irish Mortgage Holders Organisation (IMHO) says it will offer a service covering much of the cost.
The person seeking to be made bankrupt will still have to pay the cost of stamp duty and the official assignee's fees – which are expected to amount to €750 – but the new service will cover the cost of the legal work. This can be between €2,000 and €6,000.
A new unit of the IMHO is to be headed up by solicitor and insolvency expert Arthur Mullan.
David Hall of the organisation warned there were many downsides to bankruptcy and it may not be suitable for all debtors. But for some distressed borrowers there may be few other options, he said.
"Bankruptcy can be a useful and important tool to help people who have unsustainably large debts start again and move on with their lives.
"However, it is not something that should be considered lightly or without professional advice. In many cases it may be possible to do a deal with your creditors without the need to become a bankrupt."
The new bankruptcy regime came into being this week, reducing the term from 12 years to three years.
The Free Legal Advice Centre pointed out some of the key features of the new bankruptcy rules:
* A person must be insolvent (can't meet their repayments), with debts exceeding assets of €20,000 or more.
* A person will be able to apply for their own bankruptcy but only if they have first considered a personal insolvency arrangement or debt settlement arrangement.
* Creditors (banks) will still be able to apply to bankrupt a person if the debt owed is over €20,000.
* An order can be made where a bankrupt person will have to pay income to creditors for five years. If this order is made at the end of the bankruptcy, the bankrupt may be paying creditors for up to eight years.
* Gifts and inheritances will have to go to the official assignee during the three-year process.
* The bankrupt cannot borrow more than €650 during the three-year period without declaring it to the lender.