Bitter pursuit of debt ‘causing suicides’

PRESSURE on the Government to draft laws allowing some debt forgiveness for struggling homeowners and others facing crippling debts has mounted after the Master of the High Court said repossessions were causing untold social harm, including suicides.

Master Edmund Honohan also hit out at banks and other creditors for pursuing “to the bitter end” debtors who simply cannot pay and suggested meaningless “accountancy exercises” were causing considerable social disquiet and driving some people to suicide.

“We know which banks were the cheerleaders for the tiger. Yet some banks are reverting to type and come to court assuming that the banker always wins anyway. That’s not how the law sees it,” he said.

His comments, which will have been keenly followed by the judiciary as a whole, were supported by the Money Advice and Budgeting Service (MABS). The Irish Banking Federation (IBF) also said recommendations made last year by the Law Reform Commission (LRC) needed to be “taken forward” by government.

It comes as the New Beginning Group, made up of solicitors and barristers working for free for people whose family homes are under threat of repossession, said it was about to appeal two repossession orders to the Supreme Court.

David Hall, one of the group’s co-founders, said it was “inundated” with appeals for help. He cited a case in which he claimed a council sought and received an order for possession on an apartment secured under the Affordable Housing Scheme and in which arrears stood at only €7,300.

He said the mortgage debt issue was “at crisis point”.

Last November the Expert Group on Mortgage Arrears and Personal Debt said it did not recommend a formal debt forgiveness scheme, arguing that forbearance was working and that the repossession rate was lower than that seen elsewhere.

However, it said the situation was likely to get worse before it got better and recommended a deferred interest scheme for borrowers who can pay at least 66% of the interest on their loan.

The law commission also made recommendations regarding personal insolvency and bankruptcy, while the Programme for Government outlined proposals to be examined, including converting MABS into a Personal Debt Management Agency with strong legal powers to support families “who make an honest effort to deal with their debts… providing protection from their creditors where appropriate”.

David Culloty of MABS said the Government needed to address the LRC proposals. He said “debt settlement may be a better approach, rather than debt forgiveness on its own”.

IBF spokesman Felix O’Regan said the IBF supported reform but that debt settlement or restructuring could only take place “in very specific circumstances”. “As far was we are concerned, the focus has to be on how these [LRC] recommendations are going to be taken forward by government. We are in the process of sitting down with all the mainstream lenders to identify what would be a common approach to the reforms of the LRC.”

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