There has to be some independent arbitrator

The Debt Relief Order is binding on the creditors whether they like it or not.
The Bankruptcy Order is binding on the creditors whether they like it or not.

The Debt Settlement Arrangement needs the approval of 65% of the creditors and then it is binding on the balance.
The Personal Insolvency Arrangement needs the approval of 75% of secured creditors and 55% of unsecured creditors. So in reality, any mortgage lender can veto the arrangement.

There needs to be some appeals mechanism. If the debtor can't get the agreement of the the mortgage lender, then the debtor should be able to appeal to some independent body to arbitrate on it.

Certainly a small group of unsecured creditors should not be able to veto an arrangment which is approved by the largest creditor.

I am thinking of the following example.
A borrower has an unsustainable mortgage.
The lender should be compelled to recognize this and allow the borrower to sell the house.
The remaining unsecured debt should be subject to debt settlement over 5 years without the need for the borrower to go down the bankruptcy route.

Brendan

Discussed this evening on the GH Show with Eddie Hobbs. Anomolies in the proposed legislation were raised by Eddie at the presentation. He was told that they would accept no further questions from him (this may be due to a need to let in others). However, the response on issues like this was that the proposals are open to amendment before becoming legislation.
Of equal priority is the implementation of the legislation and the logistics around same. I.e The appointment/supervision etc of the independent arbitrators and whether they be Gov employees or independent. Who pays them etc. All indicate a procrastinated period of implementation & it may be a couple of years before the process is up & running unless it is put outside of the Public Sector. I'm concerned that the perception of getting the process moving is now satisfied and there will be no urgency in the implementation process.

In the UK, the trustee declares the costs of an IVA at the creditors meeting, and it is up to the creditors to appoint them, even though the debtor may have nominated them.

Once appointed, the trustee's responsibility is also to that of the creditors. If the trustee becomes aware of stashed assets, breaches of trust in the agreement etc, they must report this to the insolvency service. This is where the offences come into play.

The fees are also charged against the accumulated debt repayment made over the period of the agreement, ie trustee and creditors get paid from the money collected.

Brendan Burgess said:

There needs to be some appeals mechanism. If the debtor can't get the agreement of the mortgage lender, then the debtor should be able to appeal to some independent body to arbitrate on it.

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My belief is that this bill was run by/drafted by the bankers and that they want to call the shots.

There seems to be a belief in some circles that such an independent arbitrator would be unconstitutional as it would be an arbitrary, unjustified and disproportionate interference with the lenders' property rights.

Only the Supreme Court could confirm this, but property rights are not absolute in our constitution and I believe that it could be frame in such a way that the interference was proportionate.

At the FLAC conference Professor Gerry Whyte made a very interesting presentation:

Property rights of creditors and the public interest

The Departments of Finance and Justice believe that it would be unconstitutional for a court or other arbitrator to have the right to simply reduce a mortgage as it would interfere with the lender's property rights. (I think that is the same argument why upward only rent reviews were not able to be abolished retrospectively)

Professor Whyte's presentation was the first systematic presentation of why the protection of the bank's lending contract might not be absolute. cut. I would like to have seen a response from an SC to the presentation. However, to be fair to Professor Whyte, he did present both sides of the argument.

[FONT=&quot]1.2° The State accordingly guarantees to pass no law attempting to abolish the right of private ownership or the general right to transfer, bequeath, and inherit property.
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[FONT=&quot][/FONT][FONT=&quot][/FONT]
[FONT=&quot]2.1° The State recognises, however, that the exercise of the rights mentioned in the foregoing provisions of this Article ought, in civil society, to be regulated by the principles of social justice.
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[FONT=&quot][/FONT][FONT=&quot][/FONT]
[FONT=&quot]2.2° The State, accordingly, may as occasion requires delimit by law the exercise of the said rights with a view to reconciling their exercise with the exigencies of the common good. [/FONT][FONT=&quot][/FONT]

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The argument would be that the overriding common good and principles of social justice would allow a proportionate response.

I don't like the idea of a court being able to write down a mortgage, but that is because, I don't think it's a good idea. On the other hand, I think that the court or some arbitrator should be able to force a bank to allow the sale of a property where the mortgage is unsustainable.

I would think that the bar would have to be set very high to get this through.

But I think it's worth trying to do and then the Supreme Court could rule on whether it is constitutional or not.

Professor Whyte also dealt with the issue of whether any such arbitration on mortgage debt could be assigned to a some body other than the courts. I know that this was a big issue in the framing of the law setting up the Financial Services Ombudsman. It seems to have survived the doubts.

Brendan Burgess said:

I don't like the idea of a court being able to write down a mortgage, but that is because, I don't think it's a good idea. On the other hand, I think that the court or some arbitrator should be able to force a bank to allow the sale of a property where the mortgage is unsustainable.

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I don't get this, if you owe say 300K on a property (family home) worth 100K and you cannot afford the 300K (and have pleny of other debts you are unable to repay etc) but could afford a mortgage of 100K would it not be better that the 200K is written down and the you pay the bank a new 100K mortgage. In essense you are bankrupt, what good does it do to evict someone in this situation. If the bank evicts you they still only get 100K less their costs, legal costs, costs of sale, costs of minding the property etc. It's a better return for the bank to have the performing 100K loan and better for society that the family stays in the home.

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I do believe I wrote this point yesterday, not sure if it was on this thread, but you said you deleted someting not sure if it was this.

Why dont we just copy the English system ?
Why do we always think things are somehow different in Ireland ? If your bankrupt your bankrupt ! The English system seems very efficient and quick and works well.
oh sorry I forgot some people want their pound of flesh and Minister Shatter is making sure there is plenty of future work for his legal buddies .

Actually what I've said has come to pass. BofI has agreed a voluntary surrender and written down a 170K mortgage to 18K payable over 6 years.

At last some reality from a bank. Maybe we could get Ireland inc going again.

Looks like the insolvency legislaiton is being put on the long finger. No chance now until the Autumn and you can be sure they mean November and then we'll be into xmas and after that 2013. Disgracefull that a Minister can say it's very complex, hence the delays, why not just simply copy UK legislation or Norway legislation. Copy what works. How difficult is that.

Agreed Bronte, sadly this just puts some people in more trouble with all these delays.