One in four people who enter insolvency negotiations with creditors have voluntarily given up their homes, a company working in the sector said this morning.
Grant Thornton Debt Solutions, who operates as a Personal Insolvency Practitioner (PIP), said that before submitting clients’ documents to Ireland’s Insolvency Department, he entered into pre-negotiations with creditors . In 80% of the cases, it received the approval in principle of the stakeholders to conclude an agreement.
In the context of personal insolvency proceedings, 25% of the 20 cases handled so far have opted for the voluntary surrender of assets. This effective return of the keys to their properties to the bank allowed debtors to leave unsustainable mortgages behind, GT Debt Solutions said.
“This is an important step for those looking to take advantage of the new legislation and provides real structure and light at the end of the tunnel for those with unmanageable debts,” said Stephen Tennant of GT Debt Solutions. .
“We can see that the market is now starting to find its feet and the industry protocol is starting to develop. We realize that the legislation, although imperfect, provides a solid basis for people exposed to several creditors to face their financial problems in a systematic way.
He said that when it comes to debt settlement agreements, the company is seeing “a number of people who are able to pay off their family mortgage loans but are under significant pressure from their unsecured creditors, which puts great financial pressure on people, we find that many of these families are living on less than reasonable living expenses and this new law offers them real relief. ”
The company said 85 percent of the cases involved families with children with applicants for one of the insolvency deals from a cross-section of professions, including government officials, office workers, salespeople and traders. .
Bankruptcy laws are expected to be introduced next week and will shorten the period from 12 to three years and are expected to significantly strengthen the hands of many heavily indebted people who are struggling to make deals with their banks.
Earlier this week, a Donegal official became the first person in the country to have a debt settlement agreement accepted by his creditors. Three of the country’s main banks were involved in the arrangement, provided for by new legislation, along with three other creditors. The man in his 40s had unsecured debts of over $ 100,000 after his business collapsed.
Ireland’s head of insolvency, Lorcan O’Connor, said it was “positive to see the first case crossing the line” and said the ISI had started to see the banks’ commitment. “If the banks start making deals, I hope that people who thought they had to use the insolvency service will be able to make deals independent of us.”
He said the SI had never suggested the spending guidelines would be “draconian” and said they were “always just a guide. The default position was that a person would not have private health insurance or a second car, but if a person is in poor health, it makes sense that they are allowed to keep their health insurance or if they need a second car to get to work, that should be allowed. ”
In the meantime, the Central Bank has released a consultation paper that sets out additional consumer protection requirements that will apply to debt management companies.
All businesses will need to provide more information to customers about fees, while a standardized method of financial valuation will need to be adopted that takes into account all of the debt solutions available to consumers.
He must also provide a statement of adequacy which will include a description of the actual or potential risks and consequences of the course of action offered to consumers.