Bankruptcy rise sparks fears of homes being lost

There were 448 personal bankruptcies last year according to the state’s insolvency service, amid fears many of those cases involved the repossession of family homes.

The number of bankruptcies last year was eight times that in 2013, with the Insolvency Service of Ireland claiming the surge in the last quarter of 2014 of people seeking personal insolvency arrangements is likely to continue.

The ISI published the figures, which also showed more people applying for insolvency in the last quarter of 2014, than in the previous nine months combined.

Of the almost 1,000 cases lodged with it last year, people seeking alternatives to bankruptcy accounted for 547 of them, with bankruptcy seen as the only option in 448 cases.

There are currently 1,600 cases with the ISI, of which 38% relate to Principal Private Residence Mortgages. The ISI said, in many of those cases which result in bankruptcy, the house is likely to have been repossessed — chiming with fears expressed by groups such as the Irish Mortgage Holders Organisation about a wave of house repossessions in the coming year.

David Hall, of the IMHO, said lenders such as Bank of Ireland had “a veto” when it came to certain PIAs and could decline proposals.

“In circumstances where the bank turns down insolvency arrangements there must be an independent body that can overturn that, if it is an unreasonable decision,” Mr Hall said, adding that despite legislation aimed at opening up insolvency as an option for people, it was a “privatised system” where banks wielded power.

John Warren, of ISI, said the surge in the number of people inquiring about bankruptcy was due in part to costs being reduced from €1,400 two years ago to €270 now. However, he said the number of people seeking bankruptcy and personal insolvency in the last quarter of 2014 was also due to a “pent-up situation” now being released because of changes to bankruptcy laws and the untenable nature of some debt held by people around the country.

Much of that debt was tied up with mortgage-related arrears, he said. Asked if it was likely that homes involved in the 448 bankruptcy cases in which ISI were involved with last year led to repossession, he said: “Technically, yes” — although he said in some cases while the house may be lost the debtor might be allowed to remain in it.

The state-backed ISI is just one agency facilitating Personal Insolvency Arrangements (PIA) in which people are referred to Personal Insolvency Practitioners (PIPs) who are statutorily obliged to review the applicant’s circumstances and attempt to broker an arrangement between creditors and debtor.

“What I would hope we see is as soon as they get a letter [asking] that they hand back the keys, that they get in touch with a PIP,” he said.

The figures showed that between October and December last year there was a 148% rise in PIAs approved via the ISI — more than the previous nine months combined.

However, while the average write-down on a mortgage was 16%, the average write-down on unsecured debt, such as personal loans and credit card debt, was much higher at 89%.