“The law that set up the Insolvency Service of Ireland is seriously flawed and needs to be reformed urgently. It is causing widespread hardship to families burdened by personal and mortgage debt”, the Fianna Fáil MEP candidate for Midlands North West, Senator Thomas Byrne, has said.
He was speaking at a public meeting in Leixlip, county Kildare on ‘Debt Recovery and Personal Insolvency’. The meeting, in the Springfield Hotel, was organised by Fianna Fáil local election candidate, Gráinne Whelan, and the other speaker was Vincent P Martin of New Beginnings.
“I believe the situation can be improved in two ways. First, the power of effective veto needs to be removed from banks. We need an independent appeals mechanism for debtors whose proposals are refused by creditors. The Insolvency Service needs to closely monitor the outcome of cases and outline the reasons why there are not more successful outcomes.
“Secondly, we need to address the issue of costs. Some insolvency practitioners appear to be seeking sizeable upfront payments for the preparation of applications. There have been reports of up to €3,000 or €4,000 being sought. This puts the service beyond the reach of many people who desperately need it. We need a system funded by the State and the creditor institutions for cases in which the debtors’ circumstances render them unable to access the system.”
“When the Bill establishing the Service was passed in October 2012 the Minister for Justice Alan Shatter expressed confidence that financial institutions would be willing to cooperate with the system. He suggested that in eighteen months we would be in a position to assess its effectiveness and if the expected level of engagement did not occur, the system would be revisited. The Insolvency Service of Ireland has published statistics showing that only four insolvency deals involving mortgage debt have been approved by creditors. That time period has now passed and the legislation has failed the test set by the Minister himself.
“This failure brings into clear focus the warning Fianna Fáil gave when the legislation was going through the Dáil – that a system that gives the banks an effective veto over all insolvency deals was not fit for purpose. Even in the less complicated scenario where the borrower has only unsecured debt, the use of the legislation has been extremely low.