The Insolvency Service of Ireland will meet the country's banks next month to ask why there has been a sharp increase in objections to personal insolvency arrangements involving mortgage debt write-downs.
Lorcan O’Connor, the director of the insolvency service, has called the meetings with mortgage providers as new figures show the number of arrangements - where insolvent individuals can have debts ofup to €3 million written down - have fallen by 39 per cent in a three-month period.
A personal insolvency arrangement allows heavily borrowed debtors to avoid bankruptcy and have mortgage and other secured and unsecured debt restructured or written down over as many as six years.
Decline
There were 132 personal insolvency arrangements approved between June and September compared with 218 in the previous three-month period, according to the latest quarterly figures.
The service attributed the decline largely to the 433 personal insolvency cases that are subject to a court review known as a Section 115A case where a proposed deal or an objection to a deal can be challenged.
“We are meeting with the banks over the coming weeks to tease out what those issues were with a view to removing any further logjam,” said Mr O’Connor.
A number of cases have stalled in the High Court as they await a legal ruling on the standing of debtors and personal insolvency practitioners in the court appeals on the debt write-off arrangements.
Mr O’Connor has expressed his disappointment at the reluctance of banks to engage with debtors in the negotiation of personal insolvency arrangements ahead of any objections that lead to court reviews.
He wants banks to engage constructively with debtors on the restructuring of mortgage and other debt at the outset when they agree 70-day standstill arrangements with the issuing of a protective certificate.
Legislation
He has not ruled out legislation to force banks to engage with debtors and their advisers.
“Clearly, the quickest way to do it would be for everyone to sign up in principle to do it and then one can regularise that over time,” he said.
Mr O’Connor said that he was encouraged that there had not been a slowdown in the number of new applications for debt write-off deals. He attributed this to the Government’s Abhaile mortgage arrears scheme that offers insolvent debtors free consultations with personal insolvency practitioners.
There were 962 new applications for personal insolvency arrangements in the third quarter of the year, down from 1,082 in the previous quarter.
There were a total of 1,119 new applications seeking some kind of debt relief in the third quarter - down from 1,259 in the previous quarter - involving €464 million in debt.
