JUSTICE MINISTER Alan Shatter has welcomed a report today that Allied Irish Banks (AIB) is preparing to write-off a portion of some customers’ mortgage debts in the new year.
The Irish Examiner reports today that the bank’s head of arrears Garry Stran has said that about 30 per cent of borrowers who have had mortgages restructured and are working with the bank could have a portion of their debt written off.
According to the paper, he said that writing off debt “where people are doing the very best they can is absolutely appropriate” but ruled out any wholesale debt forgiveness.
Shatter said that the comments were welcome and said that it was of “crucial importance” that debt forgiveness be an option but only in limited circumstances.
He said in a statement: “It is clear that any such arrangements can only apply to those who truly cannot pay as opposed to those who will not pay and that there cannot be “wholesale debt forgiveness”.
It is, however, of crucial importance that debt forgiveness be an option available and applied by financial institutions in dealing with the circumstances of individuals under enormous financial stress and who are in reality effectively insolvent.
The Minister said that he had consistently pointed out the importance of banks and other financial institutions engaging in debt forgiveness “where it is clearly warranted” and where there was no prospect of a person being able to discharge their debt fully.
Shatter also confirmed that the long-awaited Insolvency Bill will be enacted through both the Dáil and the Seanad by 20 December with a view to it being operative early next year.
The legislation proposes that a person with debts of between €20,000 and €3 million, including mortgage debt, could enter a personal insolvency arrangement whereby their debts are taken over by a trustee who deals with creditors.
If debtors do not agree to the arrangements then a borrower can seek to declare themselves bankrupt.
Crucially the law proposes to reduce the amount of time it takes for a person to discharge themselves from this bankruptcy from 12 to three years but some argue the law does not go far enough.
Concerns have been raised about debtors having to sell items of sentimental value such as jewellery, what defines a reasonable standard of living after items are sold to help settle debts and how much discretion is left to the banks and the courts.
Shatter said of the legislation in his statement today: “For debtors it holds out the prospect of their continuing to occupy and own their family home and of real hope for the future.”
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