The Irish government recently published its much anticipated Personal Insolvency bill.
At least it’s a less dramatic title than the We’re Economically F**ked bill.
This has been done at the behest of the Troika so as to bring our bankruptcy laws more up to date with other countries. At present it takes 12 years to exit bankruptcy in Ireland.
People who are in arrears with their mortgages or other personal debt are stuck between a rock and a hard place. There has been a lot of speculation in the media about what effects this new Bill will have when it is eventually enacted by the Government.
Some of the Banks report that the number of mortgages in arrears by 90 days or more are still increasing, even five years into this crisis.
It is unlikely that the Banks will want to see a large proportion of the people with mortgage arrears opt for bankruptcy. This would entail the banks taking possession of lots of houses and thereby crystallising the loss for the bank. If large numbers of houses and apartments come onto the market it will further depress prices and consequently have a negative effect on the Banks balance sheet, as it will put more people in negative equity.
So it is to be anticipated that the Banks will play a slow game, of trying to get people to stay in their homes by various options, such as splitting the mortgage and parking a section of the loan. This will allow reduced payments in the short to medium term. Other options will be interest only payments. It will be interesting to see how much of its loans that the Banks are ready to write off.
In the meantime most of the large builders have gone to England to get through bankruptcy which only takes two years in the UK.
