Friday 20 April 2018

Bank told to explain why it vetoed insolvency debt deal

Enda Kenny
Enda Kenny
Charlie Weston

Charlie Weston

A leading bank has been ordered by a High Court judge to come into court and explain why it turned down an insolvency arrangement.

It is believed to be the first time a bank's veto has been questioned by the courts.

Ulster Bank turned down a State-backed personal insolvency arrangement for a Cork-based mortgage holder, despite claims the bank would get less money back if he is declared bankrupt, the Irish Independent has learned. The development comes a week after Taoiseach Enda Kenny criticised the way some banks were dealing with people facing repossession of their homes.

He told the Dáil the banks would be called in shortly by a Cabinet sub-committee "to discuss the nature of the arrangements they make with people".

Banks will be asked to explain why they are turning down insolvency deals which form part of the State's Insolvency Service.

Yesterday, the High Court adjourned a bankruptcy application from a Cork father of adult children.

The man was seeking to be declared bankrupt after Ulster Bank rejected an application for a personal insolvency arrangement.

The man's adviser, personal insolvency practitioner Mitchell O'Brien, had sought a deal he said would have given more money back to the bank.

The deal would have seen €150,000 written off the value of the mortgage, with the bank getting back €230,000 by the end of the mortgage term, Mr O'Brien claims.

Under bankruptcy, Ulster Bank stood to end up with just €108,000 after repossessing the home and selling it, he said.

Barrister Keith Farry, who was working for the mortgage holder pro bono, told Justice Caroline Costello that the application for bankruptcy was because of a failed personal insolvency arrangement (PIA).

A PIA is a debt settlement deal where a person with unsustainable debts gets some of the borrowings written off on condition they meet restructured repayments over a five-to six-year period, and keep to spending limits.

It has to be agreed by lenders and approved by the courts.

Mr Farry, instructed by solicitors Holohan Law, told the court that under the section 148 of the insolvency legislation, the courts had to examine all alternatives before a person is declared bankrupt.

He said the case of the Cork man seeking to be declared bankrupt was due to a failed personal insolvency arrangement.

A former construction worker, the man now works in a factory, is separated and the father of adult children.

He had borrowed around €380,000 to buy the home, but the home is worth only a fraction of that now.

The judge said she wanted to hear from Ulster Bank on the matter, and adjourned the case for two weeks.

The Taoiseach recently called in the head of the Insolvency Service Lorcan O'Connor and some of the most active PIPs to find out why just 1,000 state-approved debt deals have been done in the last year.

He later told the Dáil he wanted to know why banks were turning down insolvency deals that would keep people in their homes.

Ulster Bank said in a statement it does not comment on individual cases, but it seeks at all times to keep people in their homes.

"Under bankruptcy, a customer will certainly lose their home - something which is unnecessary in the majority of cases.

"Before a customer is declared bankrupt, we remain eager and ready to agree a solution to allow customers to stay in their home, and the community they have chosen," she said.

Irish Independent

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