Tuesday 22 October 2019

Insolvency chief: we'll pursue defaulters

Charlie Weston Personal Finance Editor

PEOPLE who deliberately do not pay their mortgages in the hope of securing debt deals will be prosecuted, the head of the new Insolvency Service has said.

So-called 'strategic defaulters' face fines of up to €10,000 or could end up being jailed for five years, Lorcan O'Connor has warned. Some estimates have put the numbers who are not paying their mortgages – even though they have the funds – as high as one-third of those who are in arrears on residential and buy-to-let arrears.

Almost 100,000 residential mortgages are in arrears of three months or more and payments on 28,400 investor mortgages are not up to date.

This means that up to 40,000 may be avoiding paying a mortgage that they can repay in the hope of a debt writedown.

Mr O'Connor said that if some of these people are choosing not to pay in the hope that they can avail of one of the new insolvency deals that his office has been set up to offer, then his service will chase them down.

He said the Insolvency Service was obliged under law to prosecute anyone who is "gaming" the system to gain an advantage.

"There is anecdotal evidence that in some cases people have been either preferring certain creditors over others or adopting a strategic default," Mr O'Connor told the Bloomberg news service.

Mortgages

The Insolvency Service is due to get up and running next month, when people will be able to apply for debt write-off deals. But these people will face a clampdown on their spending to get a deal.

Mr O'Connor said it would be unfair to the 99pc of people who were genuinely in mortgage distress to see those who were pretending they cannot pay getting some deal to which they are not entitled.

The new service will oversee deals where those in mortgage distress can apply to have some of up to €3m worth of loans, mortgage debt and buy-to-let debt written off over a five- to seven-year period. Non-mortgage debt can also be written off under a debt-settlement arrangement (DSA).

Up to 20,000 people are expected to avail of these arrangements, Mr O'Connor said.

Irish Independent

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