Updated 10:12 am, January 31, 2013
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January 16, 2013 by David Murphy
By David Murphy, Business Editor
This week came an insight into how the new Insolvency Service of Ireland will operate: it hinges on deal-makers.
When Irelandâ€™s financial crisis first began to detonate, the then Government quickly established Nama to filter out the large property and development loans from the banks.
That was in 2009. In 2013, attention is finally turning to ordinary borrowers.
This week the director-designate of the new Insolvency Service of Ireland, Lorcan Oâ€™Connor, made his first public appearance to a gathering of accountants and other professionals. Mr Oâ€™Connor is a former director of restructuring at accountancy group Deloitte.
At present he has no permanent offices, no corporate governance guidelines, no IT system, and has only a skeleton staff. He doesnâ€™t even have business cards, he admitted, when I asked for one.
Despite all that, Mr Oâ€™Connor appears to be no slouch, and is determined to hit the ground running. He has youth on his side, having graduated from UCD in 1998.
He is working with a small team on a public information campaign which will begin before the end of March. Mr Oâ€™Connor hopes to accept applications from over-indebted borrowers in the second quarter of the year.
Before the system of debt settlement arrangements can be put in place, he needs to license his lynchpins: Personal Insolvency Practitioners or PIPs. These are individuals who will propose deals between borrowers and lenders.
Their job will be to advise debtors on their options, and to convince lenders that their suggested proposals are in the best interests of both parties. Mr Oâ€™Connor said the PIPs will need â€śa level of legal backgroundâ€ť, they must have commercial acumen and will have to pass fitness and probity tests. But above all, he stressed: â€śThey need to be deal-makers.â€ť
One significant criticism of the new insolvency regime is that the banks will hold all the cards: they will be in a position to veto proposed schemes. Initially, this was the case in Britain when a similar system was established; after a period, however, financial institutions decided it was financially advantageous to co-operate.
But there are other concerns for borrowers hoping to avail of the new service. Firstly, anyone deciding to apply will have their name published on a register, although it wonâ€™t contain details of their financial situation.
Secondly, there will be tough rules. In the case of applicants for a Debt Relief Note, which allows a write-off of unsecured debt under â‚¬20,000, a borrower cannot be left with disposable income above â‚¬60 at the end of each month.
The next six months will be important, and much work needs to be done quickly. It will take longer than this time-frame before it becomes clear whether the new service is working, however.
Crucially for mortgage borrowers hoping for a fresh start, the banks need to co-operate from the beginning. But will they?
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