People struggling with debts they cannot repay should feel no stigma and should not be afraid of making contact with the Insolvency Service of Ireland (ISI), an Oireachtas committee has been told.
Addressing the Justice, Defence and Equality Committee, the head of the ISI Lorcan O'Connor said that there were still 37,000 mortgages in arrears of longer than 720 days and a "lack of engagement" was hampering the resolution of a large number of cases.
He said the “vast majority” of those who were struggling financially were the victims of circumstance and had not engaged in reckless borrowing.
He cited examples of those who had bought properties at the height of the boom and then lost their jobs or encountered some other personal difficulty and were no longer able to service their debts.
He said this cohort “shouldn’t feel any stigma and should hold their heads up high” adding that those who addressed their debts in a meaningful way would be the first to see damaged credit ratings repaired in the future.
Mr O’Connor also addressed criticism which has been directed at the ISI over the low level of cases it has dealt with. All told just over 1,000 Debt Relief Notices, Debt Settlement Arrangements and Personal Insolvency Arrangements.
He said that while the numbers were small and he “would have expected activity levels to be higher” the service has been set up “in record time compared with other jurisdictions”.
He also pointed out that many deals which are being struck between banks and borrowers outside of the official system were being reached because of the “carrot and stick” it had created.
He said the debt solutions on the table now were not just positive for debtors but also for creditors and there was nothing contained within the new insolvency regime that would create more bad debts.
He rejected arguments put forward by some banks that they would not engage in debt write-down over contagion fears and said there was no evidence showing that people would seek to misuse the insolvency system in order to get debt forgiveness.
Mr O’Connor also told the committee that the ISI was ramping up its information campaign to ensure that as many people who needed the services of the insolvency system could be made aware of it as possible.
