I’m looking for some information on bankruptcy and repossession laws in Ireland as I’ve heard a few people (admittedly mainly VIs) say that it doesn’t feature highly in Ireland as a risk for homeowners but they don’t explain why. Although I’m Irish, I’ve lived abroad ever since I graduated (2001) and am only really familiar with the German and UK property markets.
In the UK, for example, if you go into mortage arrears of usually more than 3-6 months then the lender has the right to order repossession and forced sale to recover money. If you bought for, say, 300K and the lender sells it off at auction for 200K, you’ll still owe 100K to the lender and all their costs / fees / arrears / penalty charges as well so unless you are well cushioned financially you’ll probaby be bankrupted by the proceedings. Bankrupt status lasts for up to 2 years (I think). england.shelter.org.uk/advice/advice-2914.cfm
Is this also the case in Ireland and, if not, why not? The fear of negative equity and bankruptcy casts a fair shadow over here in the UK as it was a major factor in the last housing crash. Yet when I read Irish newspapers it doesn’t loom large as an issue. One story in the Indo (aka rag) recently seemed to regard 120 annual repossesssions as big news even though that’s a tiny number. Is it the case in Ireland that lenders are willing to come to arrangements with borrowers rather than repossess? I can’t see how that would work if everyone starts defaulting as banks will go bust. Most Irish people look blank at me too when I mention negative equity as if they’ve never heard the term (I’m not being sarcastic - they really don’t seem to know what I mean).
Is the legal situation different in Ireland? If so, then that could explain a lot of the willingness to leverage hugely to get into the market.
Hope some experts on propertypin can shed some light!
Thanks, I’d come across some of the information on courts.ie before as I looked up the Irish Bankruptcy Act from 1988(?) to see what the legals were. It seems to be the same situation in Ireland as in the UK or actually worse if anything since the bankruptcy lasts for 12 years if not discharged by at least 50%. If so, why are people talking about handing the keys back and walking away? And why aren’t they more worried about negative equity? Maybe they’re expecting Mammy to sell off her house and pension savings to bail them out in true Irish style…
People seem awfully cavalier about debt if the consequences of going bankrupt are that harsh…
The irony of bankruptcy in Ireland is that it costs a great deal of money, which generally the debtor doesn’t have and the creditor is unwilling to spend. If the debtor does have any assets there are generally much cheaper options for the creditor to enforce their debt. The Beverly Cooper-Flynn case is the exception that proves the rule - in that case the consequences of bankruptcy were such as to force her to pay up.
It’s interesting if that’s the case because that would explain the low rate of repossessions and bankruptcy up until now but how would that pan out with defaults on a mass scale? It’s alright one or two chancers getting away with defaulting on their mortgage if their creditors don’t have the money to pursue costs but imagine about 20-30% of mortgage holders defaulting on their payments: banks wouldn’t have the money to pursue the debtors in the courts but the less debtors they pursue, the less money they have which means they’ll probably go bust. That would be economic meltdown as a string of lenders would be affected.
The bankruptcy laws in Ireland do seem very old-fashioned so I wonder if this debt crisis will spark Irish banks to lobby the govt to change the law so it’s cheaper to pursue bankruptcy and get their money back.
In a situation where a company goes into liquidation (insolvent) the liquidator must submit a report to the ODCE within six months of his appointment which, amongst other things, must deliver an opinion as to whether or not an action is required in realtion to having the directors restricted from acting as directors in other companies. The ODCE then has the final say as to whether the liquidator is relieved of this reponsibility of taking an action or not. If there is evidence of reckless trading then it will be incumbent upon the liquidator to take an action through the courts seeking restrictions. That’s it really - the directors would not be held personally liable for the debts.
No. There is a misconception here that a creditor needs to have a person declared bankrupt in order to enforce a debt against them. This is almost never the case. Suppose A owes B â‚¬200,000. B can 1. get a judgment mortgage against any other property A owns, 2. get a garnishee order against A’s wages or other source of income (including a debt owed by somebody else to A) requiring all / a portion to be paid directly to B, 3. send in the Sheriff to seize any personal property (expensive cars, paintings, machinery, etc.) owned by A. No need to have A declared bankrupt in any of these scenarios, nor would you as a creditor seek to do so.
jcsmith: Thanks for clearing that up - I had assumed, as you say, that you needed to enforce a bankruptcy order on a debtor in order to liquidate their estate and ensure payment. It makes more sense that the creditor would want to keep the debtor solvent to ensure payments e.g. if a civil servant defaults on a mortgage payment, it would be better to forcibly acquire a portion of his earnings through a court order than declare him bankrupt and have him lose his job.
That being the case, it would seem to be true that repossessions will play less of a role in Ireland than they have elsewhere as creditors would simply enforce payment of debts through court orders rather than repossess for forced sale at auction. Does anyone else think this will lessen price drops? Even if it does, it’s still not a pretty picture: I can imagine thousands of civil servants, teachers, guards etc trapped in the unending hell of first-time buyer semi-ds in the commuter belt for the next 20-30 years which is quite a depressing thought.
I should probably add - none of those options exclude the others. It’s always open to a lender to repossess then follow up with a garnishee order, etc. Normally though I’d expect that repossession or a quasi-voluntary forced sale would be the first choice - after all if A falls into significant arrears on their mortgage they’re unlikely to have any other assets or income worth talking about.
“It’s interesting if that’s the case because that would explain the low rate of repossessions and bankruptcy up until now but how would that pan out with defaults on a mass scale? It’s alright one or two chancers getting away with defaulting on their mortgage if their creditors don’t have the money to pursue costs but imagine about 20-30% of mortgage holders defaulting on their payments: banks wouldn’t have the money to pursue the debtors in the courts but the less debtors they pursue, the less money they have which means they’ll probably go bust. That would be economic meltdown as a string of lenders would be affected.”
The banks would not have the resources or expertise in their work out departments to process this number of defaults. When similar situations arose in Germany and Japan the banks sat on the defaulting loans hoping that they would go away before biting the bullet, marking down the loans and selling them as Non-Performing Loan portfolios. NPLs are bought by Investment Banks and funds such as Fortress at 50c in teh Euro and then they build a business around working them out. The idea is to process them on a bulk basis with a team that do nothing else and squeeze out the cash to get to 75c in the Euro.
This is not loan sharking but these are professionals who will maximise the amount that debtors payup. They will prefer to strike deals than go through the courts but they will not be push overs and will drag out the process for years to get ever thing they can.
It is probably true that the Irish banks will not make people homeless, they will sell the loans on a portfolio basis and the Americans will make people homeless.
The US banks already have the infrastructure and the people on teh ground to do this in Germany, Portugal, Italy and Turkey so it would be easy for them to take on some Irish portfolios.
NPLs are a topic that we might start hearing about a bit more
In the new scenario that we have now! The Banks may not even own the mortgage. The Mortgagee (MGE) may be some SPV, ABS, CDO or whatever under severe stress. In this scenario, the MGE might settle for a pseudo rent situation; thereby giving some prized cash flow.
The people with negative equity might have the last laugh. In fact, the securitised mortgages are probably a load of rubbish; prime and sub-prime. I doubt the bank security is in order at all. The urgency would not be there to see that it is; since the issuing Bank would be selling the mortgage on.
I doubt that the security would be in order, because the Banks etc put all their efforts into marketing: what with half of all mortgages giving out in the past three to four years. In fact, bank’s are probably regularising the security details as we speak, as there is not allot of sales stuff happening. Anybody get a letter or a little nudge from the Manager to come in any sign a few outstanding papers etc?
The Banks have been so reckless at lending, that I would be surprised if the security is in order. So much land was bought and sold, houses built in a hurry; prices of land and houses going through the roof; house prices only go up etc. The more I think of it; the security is guaranteed to be all over the place!
No, there will be very few cases of bankruptcies in Ireland. We only knew the good times! Putting aside something for a rainy day never needed to be contemplated. It is all the pension funds and reckless lenders who will be in trouble. However, our mantra has lately been that it will all work out in the end! No need to worry! Be happy!
Excuse the rant! I am so disgusted that we as a nation allowed ourselves get into this mess. We did it with our eyes WIDE OPEN!
I doubt this. The solicitor acting for the purchaser undertakes to ensure that the bank gets good security. If they fail to do so then they are liable to the bank. Most solicitors take this very seriously - it can get very expensive if things go wrong.