Some 20,000 people in long-term mortgage arrears to be targeted in debt deals campaign

Some 20,000 people who have fallen behind on mortgage repayments for two years or more are to be targeted in a campaign promoting the benefits of debt writedowns in personal insolvency deals.

The Insolvency Service of Ireland is planning a TV and radio campaign aimed at resolving long-term arrears cases as new figures show that €4 billion in mortgage and other debt has been resolved in personal insolvency arrangements (PIAs) in a decade, including €1.78 billion over the past three years.

These arrangements, created under post-crash legislation in 2012, have been increasingly used by insolvent individuals to escape unaffordable debts from the Celtic Tiger era and more recent years with deals allowing people to write down debts and remain in their homes on a more sustainable financial footing.

Mitchell O’Brien, a Co Waterford-based personal insolvency practitioner, estimated that there was at least another €4 billion of unsustainable Celtic Tiger debt to be resolved.

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“We probably have the same number of PIAs again to run to get to the end of the last legacy issues from the crash, but we are absolutely doing that,” he said.

[ Celtic Tiger publican couple secure court write-off of €2.8m debt ]

Central Bank statistics for the period to last September show that 20,198 people were behind on their mortgage repayments for two years or more. This included 7,743 people who have missed mortgage repayments for between five and 10 years and 5,876 who have remained in arrears for more than 10 years.

Michael McNaughton, director of the Insolvency Service of Ireland, the State body set up to restore insolvent individuals to solvency, said banks and other creditors had become “much more engaged” in recent years.

“There is an increasing willingness by creditors to see the process as a viable alternative to repossession, which is traumatic for a debtor but difficult for a creditor as well,” he said.

Leaving aside recent high-profile PIAs involving tens of millions of euro being written off for boom-time property developers, he said more typical PIAs involved total debts of about €357,000 with an average home mortgage debt of €230,000 and an average write-off of €158,000.

“There are much more normal levels of debt being dealt with as well as those crazy Celtic Tiger debts,” said Mr McNaughton.

[ More than half of home borrowers in long-term arrears paid nothing in past two years ]

The campaign will be run through Abhaile, a free State-funded service offered to insolvent borrowers in danger of losing their homes due to arrears. The service offers people vouchers to receive initial financial advice from a personal insolvency practitioner.

Figures from the ISI show that debtors who secure a protective certificate, the first step in the process that blocks creditors pursuing debts, have a 70 per cent chance of later securing a PIA compared with a 50 per cent chance in the years to 2019 when more creditors contested write-offs.