This is a guest piece by Ross Maguire SC of the organisation New Beginning, which represents and defends mortgage holders. It comments on the case of Laura White, who recently secured a mortgage debt settlement with the Bank of Ireland that wrote off €152,000 of her mortgage debt.
Ms White was represented pro bono by Mr Maguire SC, Maire Mullarkey BL and Arthur Mullan of Mullan & Associates. Click here to read an Irish Times article about Laura White’s case.
Free Legal Advice Centres Ltd (FLAC) recently held a high-profile conference entitled Legislating for Personal Insolvency in Ireland, featuring a number of international speakers. Click here to see materials from this event.
The forthcoming personal insolvency legislation is intended to have a statutory scheme known as a “Debt Settlement Arrangement”. Under a Debt Settlement Arrangement, which applies to any sum of money exceeding €20,000, provided the sum of money is unsecured, a debtor may propose an arrangement to his creditor/s along the lines of a monthly repayment for a period of up to six years.
This monthly repayment would be based on the ability of the debtor to pay and would be reached with agreement from the creditor. The idea is that once the creditor makes the monthly repayments over the six year period, or whatever period is agreed, the residual debt remaining would be, after that time, written off.
The case of Laura White involved a borrower who, recognising that she was unable to afford her mortgage, surrendered the property, which was subsequently sold leaving a substantial balance in the form now of an unsecured loan. Whilst the creditor sought judgment in the full amount, a Debt Settlement Arrangement of sorts was put into place, whereby the borrower has agreed to repay a certain amount per month over a period of six years, after which, if she has made these repayments, the residual debt will be written off.
It marks, we hope, the beginning of one part of a process whereby people with unsustainable debts can agree arrangements with creditors which are of mutual benefit. The mutual benefit is that, on the one hand the creditor receives an amount representing what the borrower can actually pay, and on the other hand the borrower gets certainty and visibility on a time when they can emerge from the debt. They are thus free to begin again in a manner envisaged by the European ‘fresh start’ principle.
We hope that this will, in time, become commonplace as a mechanism by which debts can be dealt with and would promote and enhance economic recovery so badly needed.
What is beyond doubt is that the process of economic recovery is dependent upon dealing with the overhang of personal debt. As long as this problem remains unsolved there will be no meaningful economic recovery.