This article was originally published by The Business Post.
In 2008, the financial crisis hit, and there were 135,000 family homes in mortgage arrears. Today, mostly due to a change in the economic situation for some – and citizens’ endurance – there are now 76,500 family homes in mortgage arrears. The key grouping of concern is the 33,000 family homes in arrears of more than two years. While the focus is correctly on family homes, it’s worth mentioning that there are still 25,000 investment properties in arrears, 14,500 of which are more than two years in arrears.
Debt does consume you; it breaks down the strongest person. It has caused many to take their own lives – and this is as a direct result of the failure to establish a fair system to deal with those in debt. Banks, vultures and creditors have been allowed to roam free and unchallenged.
In addition to lives lost as a result of this failure, many more have suffered from mental illnesses, and many couples have separated, which has had a devastating effect on families and communities. We as a nation wore the green jersey, but others have been buried in it.
I don’t need to remind anyone that we are in the middle of a housing crisis.
Five years ago, to great fanfare, Alan Shatter announced the coming into being of the Personal Insolvency Act 2012. In a speech to the spring corporate lunch of the Ireland-US Council in early 2013, he said of the act that it “provides for one of the most comprehensive reforms of personal insolvency law and practice anywhere. The Act introduces new concepts to Irish law, designed to address complex personal insolvency cases”.
Many warned about the structure not being fair enough and being too complicated, and many were against allowing the banks to have a veto. Eventually, the government recognised the warnings were justified and the Oireachtas removed the banks’ veto in 2015. The bankruptcy term was also reduced to one year, which was very welcomed.
A few facts before we look at what needs to happen next. The insolvency system since its foundation has achieved 1,800 personal insolvency arrangements which deal with property.
The government set up an Abhaile scheme which allows debtors access to a personal insolvency practitioner (PIP) free of charge. The jury is out on the value for money of this decision. Other options contained in the programme for government seem to have been ignored, like a one-stop shop. In addition, theAbhaile scheme allows debtors facing repossession access to a duty solicitor.
Many steps have been taken, as set out above, but at the rate that insolvency arrangements are being concluded it will take 25 years to resolve those who are in arrears of more than two years alone.
The fact is the bank have ridden roughshod over the insolvency system and the Oireachtas. Multiple banks have challenged the option to appeal their declining of an insolvency arrangement and recently they were successful in a High Court ruling. This clearly shows the contempt the banks hold the insolvency legislation in.
The head of the insolvency service, Lorcan O’Connor, recently told the Oireachtas committee on justice that the banks were not engaging with the insolvency system. This was an honest and refreshing admission.
It is essential that families and businesses are allowed to move on from debt. Allowing banks to run the show will stop this from happening. Power must be removed from the banks. If we are to move on as a nation, we need to take charge of the insolvency system which has been kidnapped by the banks and vulture funds.
The insolvency process takes too long and the banks and vultures have too much power. We have treated those who are in debt like criminals. Banks have forgotten that we as a nation have contributed to them remaining in existence.
All the warnings given about the insolvency system created by government have proved to be justified and correct. To have any chance of success, the following changes are needed to the insolvency act and system.
The issuing of protective certificates for personal insolvency arrangements should be done by the insolvency service. Why, when the alleged objective of banks and creditors is to have debtors engage, do we want to complicate the process when they do engage by making them go to court?
The availability of a public insolvency practitioner who could help debtors would help tremendously. So would giving the insolvency service the ability to extend a protective certificate beyond the 70 days, rather than this application needing to be made in court as is currently the case.
Debt to the Revenue Commissioners should be included, as they have a veto. Debt to the Department of Social Welfare should also be included. A €3 million limit should be lifted, as creditors usually don’t consent. Necessity of the family home being in arrears prior to December 2015 should be removed, as people are clearly insolvent.
There’s currently no ability to appeal debt settlement arrangements; many creditors are suggesting minimum payments arbitrarily. This should be changed.
The restriction of one personal insolvency arrangement (PIA) per person in a lifetime should be removed. So should the restriction only allowing one protective certificate within a year. Lastly, for PIA appeals the debtor should be listed as taking the case and not the PIP, as per the recent High Court ruling.
If you are in debt and need help now, contact us at either mortgageholders.ie or backontrack.ie. No system is perfect; there is help, and there are solutions.
David Hall is chief executive of the Irish Mortgage Holders Organisation