Sunday 26 January 2020

Justice Committee recommends that new insolvency bill includes appeals process for individuals

Lyndsey Telford

NEW mortgage reforms could see banks and lenders forced into agreements to help struggling homeowners with a debt write-down and protect them from repossession.

The Committee on Justice, Defence and Equality has recommended that the new Personal Insolvency Bill include a process whereby individuals can appeal a bank's decision to take away their home.

Committee chairman David Stanton said the aim of the bill was to ensure as few people are made homeless as a result of the economic downturn.

"We recognise there will be times where that will not be possible or feasible or practical, but in the main we would hope that that would be the gist of this legislation," said Mr Stanton.

"That there will be a provision for a write-off of certain debt in certain circumstances to enable people to remain in their homes."

The bill was unveiled in January by Justice Minister Alan Shatter and Finance Minister Michael Noonan, but the Committee has just announced new recommendations to ensure homeowners are treated as fairly as possible.

The initial draft included a Personal Insolvency Arrangement, which allows for a six-year arrangement between debtors and their creditors to spread out mortgage payments. Under the initial legislation, lenders would not be legally obliged to enter the arrangement.

However, the new recommendation dictates that creditors that refuse to strike a deal with a struggling homeowner can be brought before an independent body, such as Money Advice and Budgeting Service, which could order them to enter the agreement.

"If there are banks, mortgage advisors, that have acted in an unreasonable manner, there will be an independent body there to adjudicate and to make a binding recommendation on that," he said.

In a Personal Insolvency Arrangement (PIA), the amount of the mortgage would be written down and the payment plans restructured to extend the term, meaning monthly repayments would be further reduced.

The PIA applies only to debts between €20,000 and €3m.

The committee recommended a binding consequence for creditors that act unreasonably.

It also raised concerns about the minimum protected income that debtors entering the Personal Insolvency Arrangement will be allowed to retain, amounts of which are yet to be agreed upon.

Other measures outlined in the Bill will see debtors allowed back in business in three years rather than the current 12.

The committee's recommendations will go before Minister Shatter, who will amend the Bill if necessary.

The final version will then go through the Houses of the Oireachtas for further consideration before being officially passed.

It is anticipated the legislation could be in place by the end of the year.

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