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Mortgage holders hit by crisis locked out of debt arrangements

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Frank McNamara and Theresa Lowe had a personal insolvency arrangement. Photo: David Conachy

Frank McNamara and Theresa Lowe had a personal insolvency arrangement. Photo: David Conachy

Frank McNamara and Theresa Lowe had a personal insolvency arrangement. Photo: David Conachy

Thousands of homeowners who fall into arrears on their mortgage due to the Covid-19 crisis face being denied access to a key debt deal mechanism unless the law is urgently changed.

Current legislation governing personal insolvency arrangements (PIAs) requires debtors to have been in arrears on January 1, 2015.

This means debtors who find themselves insolvent as a result of the pandemic will be excluded from seeking debt write-downs through PIAs, the Association of Personal Insolvency Practitioners (APIP) has warned parties involved in government talks.

APIP estimates as many as 300,000 people could become unable to meet their debt obligations due to the crisis.

"Without the necessary changes, we face an additional 300,000 people who are unable to fully avail of the provisions of the legislation," APIP chairperson Claire Kelly said in letters to Fianna Fáil, Fine Gael and the Green Party.

"In particular, debtors will be blocked from asking the courts to review their PIA proposal, purely for the reason that their insolvency was not caused by the recession 10 years ago, but by one now."

The warning came as a study published yesterday by NUI Galway's Centre for Housing Law, Rights and Policy found a fresh mortgage arrears crisis was "inevitable" due to the pandemic.

PIAs were one of a number of debt resolution mechanisms introduced after the last economic crash.

They are designed to return debtors to solvency while keeping them in their home in the vast majority of cases.

They allow for an agreed settlement of a secured debt, a debt backed by an asset, up to €3m, and an unsecured debt with no limit.

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Use of the mechanism has become increasingly common, with 1,055 arrangements approved in 2019 and 959 the previous year.

Publicity of high-profile cases, such as that of celebrity couple Frank McNamara and Theresa Lowe, has led to more debtors seeking advice.

Personal insolvency practitioner Mitchell O'Brien said APIP was calling for 10 changes to be made to the personal insolvency regime.

As well as seeking changes which would allow people who have recently fallen into arrears to be eligible, it is also seeking the elimination of another "gateway clause", the €3m secured debt cap, as well as the appointment of full-time personal insolvency judges.


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