Government to reform State’s personal insolvency regime

The Government is set to proceed with reforms to the State’s personal insolvency regime to allow full access to court protections for those struggling debtors hit by the Covid-19 pandemic.

Currently someone applying for a personal insolvency arrangement can seek a court review if their mortgage lender refuses what they believe to be a reasonable insolvency proposal.

However, in order to seek this review their mortgage arrears must date from before January 1st, 2015. This was initially introduced as the personal insolvency legislation was conceived to tackle the hangover of bad debt from the financial crisis.

However, Minister for Justice Helen McEntee has obtained Government backing to introduce an amendment to the law governing personal insolvency which will open the full regime up to those whose mortgages have gone into arrears more recently.

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Ms McEntee said the amendment Bill will tackle this and several other issues with the existing legislation. “In the context of the current pandemic these problems risk denying homeowners in difficulty the protection afforded by the personal insolvency Acts if they are struggling to pay what they owe.”

She said without a reform the existing bar on mortgages in arrears since 2015 would “mean that a person who now finds themselves insolvent and in home mortgage arrears, arising from an unforeseeable loss of income, would be shut out from accessing this vital court protection. We want to avoid such a scenario.”

The Minister is also working on a second wider personal insolvency Bill which she said would incorporate changes arising from the statutory review of the Act, which is currently under way.

The first Bill will also introduce a range of reforms designed to improve access to the insolvency regime during Covid restrictions, such as allowing advisory meetings between debtors and their financial advises to take place remotely, and allowing the extension of some procedural deadlines when exceptional pandemic-related circumstances arise.

Family homes

Mortgage arrears have remained fairly steady through the first six months of the pandemic. Data from the Central Bank shows that 5.6 per cent of loans secured on primary family homes were in arrears of over 90 days at the end of June. This is in fact a slight decrease on the level in September 2019.

Following talks between the Government and the banks last week, it emerged that generally available Covid-related breaks on mortgage payments will not be extended, although they may be considered on a case-by-case basis.

It has been suggested that more households will slip into arrears as payment breaks expire and the economic impact of the pandemic hits home.

Ms McEntee said the reform was “the first delivery on our programme for government commitment to introduce necessary reforms to our personal insolvency legislation.”

The Bill is a priority for the autumn session, with Ms McEntee saying she is hopeful of receiving cross-party Oireachtas support for it.