Almost three quarters of people living in insolvency and who have used a personal practitioner to liaise with their creditors have managed to agree a settlement which could leave them debt free.
The Insolvency Service of Ireland’s (ISI) statistics for the first quarter of 2015 show that more and more people, under the burden of huge levels of debt, are turning to that organisation to find a solution. In the first three months of this year, 525 people made an application for one of ISI’s personal insolvency schemes, including 310 who applied for a personal insolvency arrangement (PIA).
A PIA provides for the restructuring or settlement of a secured debt up to €3m and settlement of unsecured debt over a period, usually six years. It is the one to which most people who are saddled with unsustainable mortgage debt will turn.
The indebted person will approach an ISI-listed personal insolvency practitioner (PIP) who will then assess their financial situation before liaising with the debtor’s creditors, with the intention of organising a meeting at which, it is hoped, a deal can be reached on addressing the debt.
In the interim they will seek a protective notice which will give the debtor 70 days of breathing space during which the person has the protection of the court and the creditor can no longer contact them and must deal with the practitioner.
The figures from ISI show that in 75% of cases where a creditors’ meeting is secured, the PIP is successful in getting a deal on the debt. Since the scheme began in September 2013, 821 such deals have been done out of a total of 2,013 applications.
However, ISI admits the number of cases completed so far is only the tip of the iceberg — the Irish Mort- gage Holders Association pointed out the Central Bank last week estimated 30,904 people will lose their family home.
“I cannot deny the number is low in terms of the scale of the problem,” said ISI director, Lorcan O’Connor.
“But we have opened in record time and we now have hundreds of people who have successfully concluded their arrangements so we have evidence that the solutions work. Obviously, the next challenge is to spread the word so that those who need our help are aware of it.”
Nonetheless, IMHO said the figures showed the insolvency system was not trusted by debtors. It pointed out that just 129 PIA applications actually resulted in an arrangement in the first quarter of this year.
“Interestingly enough, the ISI has not detailed how many of these are family homes,” it said.
“They state that the write-off in PIAs is 22.2% on average and give the impression this involves family homes where we believe 90% of PIA’s involve investment properties only.”
Mr O’Connor rejected that, saying the “vast, vast majority” of PIAs involved the family home.
ISI has pointed out that creditors who choose to reject the PIP’s plan face losing an average of €100,000 if the person then has to declare bankruptcy.Mr O’Connor said in spite of that, a number of creditors were still choosing to vote “no”, but he hopes that percentage will fall with the introduction of a new Personal Insolvency Arrangement protocol which could push the acceptance rate up to 95%.
ISI carried out a survey of 47 cases in the fourth quarter of 2014 where creditors voted no to a PIP’s resolution proposal. Start Mortgages voted no in 80% of the deals it was involved in and Permanent TSB in 48%. By comparison the percentage for Bank of Ireland and AIB/EBS were 21% and 14% respectively.He said before such a protocol was introduced in Britain, acceptance rates were below 50% but are now above 95%.“That is where I would like to think we could get to, simply because they are losing €100,000 every time they vote ‘no’,” he said.
Stephen Rogers
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