Joan Burton: ‘Arrears deals must be made’

Bankruptcy periods could be cut back to 12 months in order to put pressure on lenders to cut deals on distressed mortgages, Tánaiste Joan Burton has signalled.

The Labour leader expressed concern at the low number of agreements banks are reaching with people struggling with mortgage debt.

Ms Burton said a strong message is needed to be sent to lenders to do more to help out householders in difficulty. 

Ms Burton said personal insolvency practitioners told her lenders were giving distressed householders the idea that a deal could be cut and then pulling out.

The Tánaiste insisted this was not fair as people in debt needed “courage” to try and make a deal with lenders and it was wrong for institutions to then not follow through with a viable solution.

“If we reduce the bankruptcy period maybe that will send a message to the banking  institutions, particularly those who are kind of playing a game of ‘now you see it, now you don’t’, suggesting to people that a deal is possible and then pulling out at the last minute,” the Tánaiste said.

The remarks came as Labour TD Willie Penrose is preparing new legislation to bring the bankruptcy period down from three years to 12 months.

Such a move would bring the country into line with Northern Ireland and Britain.

Ms Burton said she had not yet seen the Bill being drawn-up by backbencher Mr Penrose, but pointed out the Government had already cut the bankruptcy period from 12 years to three years. 

Ms Burton said the thrust of any debt moves must be to ensure people stayed within their homes. 

“We have an insolvency process vastly reduced in time from 12 years down to three, which is great. But at the same time what the personal insolvency practitioners were saying to me is that some of the banks are not cutting deals,” the Tánaiste said.

The Government’s insolvency reforms have been widely criticised for not going far enough and leaving banks with the whip hand in negotiations. Though the bankruptcy period has been cut to three years, creditors can still have a call on people’s finances for up to five years after that timeframe ends.

Taoiseach Enda Kenny has launched a review of how the insolvency arrangements are working out. 

Figures show that less than 1% of the 117,000 distressed mortgages are being dealt with by the insolvency service.


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