New insolvency system ‘too expensive for the people who need it most’

Ireland’s new insolvency system is failing those who need it most because of penal costs associated with making applications, it has been claimed.

Fianna Fáil's justice spokesman Niall Collins called on the Government to re-examine the personal insolvency regime because, he said, the high cost associated with preparing insolvency applications was "stopping people who are crippled by debt from entering the process".

His concerns were echoed by the director of the Irish Mortgage Holders Organisation (IMHO) David Hall, who called for the creation of a new role of public insolvency practitioner and an urgent review of the processes involved in making insolvency applications.

“It’s becoming increasingly clear that the very people who need the insolvency regime the most are unable to use it because they simply cannot afford it,” said Mr Collins.

He cited the example of one heavily indebted client of the IMHO who was charged €3,000 to prepare an insolvency application which was rejected by the bank.

“Public confidence in the system is very low. As we feared, it is a case where the banks still call the shots and decide the fate of the person in debt,” Mr Collins said. ”

Complaint
Mr Hall said he had made a formal complaint to the Insolvency Service of Ireland because of the rejection of the application made on behalf of his client. He said the service was essential, but "as it is currently structured it can't work".

Meanwhile, an initiative between the IMHO and AIB set up before Christmas with a view to helping distressed mortgage holders has seen more than 1,000 mortgage holders given information on the core procedures for dealing with arrears, while 123 long-term sustainable solutions have been agreed with others in the pipeline.

Mr Hall suggested the scheme could be “a template for a trusted third party to act on borrowers’ behalf”.