New rules to ease financial burdens
Long-awaited reforms to ease the 12.4 billion euro mortgage arrears crisis will allow struggling homeowners to write down debt in a six-year breathing space, it has been revealed.
An initiative under new and complex bankruptcy and insolvency rules will let debtors and creditors strike case-by-case deals to ease financial burdens by spreading out repayments.
The revised laws, announced by Finance Minister Michael Noonan and Justice Minister Alan Shatter, aim to keep people in their homes and out of the courts.
"It provides an alternative mechanism to avoid a situation where you are in appalling financial circumstances and the only option is bankruptcy and that would lead to the loss of your home," said Mr Shatter.
Under a new bankruptcy regime, debtors will be allowed back in business in three years rather than the current 12.
The new Personal Insolvency Arrangement (PIA) will allow for a six-year arrangement between debtors and creditors to spread out mortgage payments. The amount of the mortgage would be written down and payment plans restructured to extend the term, meaning monthly repayments would be further reduced.
The PIA applies only to debts between 20,000 euro and 3 million euro. But, the arrangement must be supported by at least 65% of creditors and they would consider arrangements on a case-by-case basis.
"If you take the PIA, you're providing people with a window of a couple of years to get their finances back in order," said Mr Shatter.
"By the end of year six, they are in their homes, their unsecured debt has since been dealt with and they are now in a position where they can cope with what might arise in relation to secure debt."
Mr Noonan said the PIA was unique and innovative, as there has never been an similar precedent. He declared: "We're breaking new legal ground here."