Tuesday February 14 2012

CREDIT unions are taking an increasingly heavy-handed approach to those in debt, it has emerged.

Struggling consumers have been hit with debt judgments worth €3m in the past week, with credit unions taking more of the actions than banks and other creditors.

The co-operative lenders are opting to take members to court to force the repayment of an outstanding loan, with the average value being €7,000.

The arrears of the State’s 407 credit unions have now risen to €1bn and the latest figures from ‘Stubbs Gazette’ show that credit unions continue to top the list of those securing registered judgments.

The co-operative lenders were traditionally reluctant to take legal action against borrowers.

But lately they have turned to the courts to get money back if they feel they have no other options.

If someone fails to pay a debt, their creditor can go to court and get a court judgment confirming the money is owed.

The creditor can then enforce the judgment by having goods seized or getting the court to put in place an instalment order where a certain amount of money has to be paid back weekly to the creditor.

Registering the judgment in the High Court Central Office means the details will be published in a trade gazette.

The judgment can also be registered as a mortgage over the debtor’s property.

A number of credit unions had a total of €114,000 in judgments registered against 16 members last week. The average debt value was €7,000, according to Niamh McArdle, of ‘Stubbs Gazette/BusinessPro’.

Credit unions are understood to be under huge pressure to recover debts because a surge in arrears and bad debts are raising major questions over the viability of some credit unions.

Judgments were secured by credit unions in Maynooth, Co Kildare; St Agnes in Dublin; Coolock, Artane, Dublin; E-Services (Eircom), Ayrfield in Dublin; Larkhill in Dublin; Dundrum in Dublin; Citybus Employees (Dublin Bus); and Mounthrath in Laois.

The judgments ranged in value from just over €2,000 to €17,000.

But it was not just credit unions taking debt cases.

Councils

The largest judgment, for €577,126.36, was awarded in favour of Bank of Scotland, against Seamus MacSamhradain of 46 Grange Park, Rathfarnham, Dublin 14.

Also, the BHT Group, formerly Wolseley Ireland, which operates as Brooks, Heat Merchants and Tubs and Tiles had €100,000 of bad debt registered in the courts against five of its customers.

County councils also featured strongly, including Fingal County Council, which notched up five registered judgments totalling almost €58,000.

The other major player in the judgments sector is the Collector General, who uses the courts to chase unpaid tax bills.

Last week, the taxman got registered judgments in 53 separate cases for bills totalling almost €1.5m.

Unfortunately, we have a tendency to dither and delay until the problem looms directly in our faces and the insolvency regime in this country is no exception. It has taken a financial catastrophe and the direct edict of the EC-EU-IMF troika to result finally in action.

The bailout terms were clear: by end March, according to the text, “Government will introduce legislation to reform the personal debt regime to the Houses are the Oireachtas with the objective of lowering the cost and to increase the speed and efficiency of proceedings while at the same time mitigating moral hazard and maintaining credit discipline.”

Now, having secured a one-month extension from the troika (legislation will be published end-April), the Minister for Justice and Equality, Alan Shatter, has secured approval from the Government for his draft Personal Insolvency Bill.

The Bill has been one of the most eagerly-awaited pieces of legislation of recent years and takes up many of the recommendations of the Law Reform Commission’s (LRC) report Personal Debt Management and Debt Enforcement, published in December 2010.

The proposals for the reform of personal insolvency law will involve the introduction of three new non-judicial debt settlement systems (subject to relevant conditions in each case):

· A Debt Relief Certificate to allow for the full write-off of qualifying unsecured debt up to €20,000

· A Debt Settlement Arrangement for the agreed settlement of unsecured debt of €20,001 and over;

· A Personal Insolvency Arrangement for the agreed settlement of both secured and unsecured debt of €20,001 and over.

In addition, the proposed legislation will continue the reform of the Bankruptcy Act 1988, begun in the Civil Law (Miscellaneous Provisions) Act 2011. Most significantly, this will include the introduction of automatic discharge from bankruptcy, subject to certain conditions, after 3 years in place of the current 12 years.

Minister Shatter had previously indicated the introduction of Debt Relief Orders (DRO), which effectively are certified by issuance of a Debt Relief Certificate. A DRO allows persons with “no assets and no income” to write off unsecured debt such as a credit card or personal loan within a short period (in this case the Certificate will be issued after 12 months). During this time, those whose application for a DRO is approved will get a moratorium where debts are frozen and where creditors may not pursue the debtor for the outstanding debt. If at the end of the period the debtor still cannot pay the debts back at an agreed reasonable amount each month, they will be written off. A DRO would be publicly registered on an insolvency register.

But the DRO/DRC regime is not perfect and may have appeal to the unscrupulous. It raises many questions: Should such a person be entitled to avail of a DRO more than once? Does it incentivise fraudulent disclosure? Could it result in non-take up of employment? Would it encourage involvement in the black economy?

Bankruptcy and debt relief is at one end of the insolvency spectrum but the vast majority of individuals affected will seek a settlement.

The new non-judicial debt settlement arrangement (DSA) is similar to the UK’s Individual Voluntary Arrangement (IVA) scheme that involves a legal agreement between a debtor and two or more creditors to repay an agreed amount of debt over a set period of time. At the satisfactory conclusion of the agreement, normally after five years, all debts covered by the DSA are discharged.

But the LRC proposed – like the UK – that the DSA would apply only to unsecured credit, so car loans, student loans and – critically – mortgage debt, would not be covered.

In the Irish context this is unrealistic and, in spite of public professions to the contrary, it was widely reported that differences arose between Minister Shatter – who favours the inclusion of mortgage debt – and the Department of Finance, which opposes it, presumably for the debilitating effect such a regime might have on the capital levels of the banking system.

It is a simple fact that in very many instances high levels of secured, preferential debt such as mortgage repayments, leaves little or nothing for unsecured creditors – hence a DSA is unrealistic.

Minister Shatter was well aware of the issue: “I am concerned that if we are to introduce a DSA scheme that does not include dealing with secured credit in some way, it may overly incline either debtors or creditors towards bankruptcy as the most practical application for a full resolution of their position. Deputies may wish to note that in Australia, which has very developed non-judicial debt settlement systems, bankruptcy is the option of choice in 70% approx of insolvency cases.”

The compromise was the Personal Insolvency Arrangement “for the agreed settlement of both secured and unsecured debt of €20,001 and over”: this means that mortgage debts are included up to a value of €3 million according to the draft Bill.

When the new system comes into effect, expect an avalanche of applicants – there are thousands of individuals who have been waiting for several years for this legislation to come.

The Money Advice and Budgeting Service (MABS), the body that the LRC expects will become the processor of such applications, is already straining under current demand.

At the end of June 2011, the average national waiting time from first point of contact to first appointment with a MABS money adviser was five to six weeks. Some 17,536 new clients presented themselves to MABS in the year to September 2011. This is just a 3 percent increase on the number of new clients presenting in the same period in 2010 (16,969) and a 19 percent increase on 2009 (14,704) but it is the absolute number of individuals/families involved that is the frightening aspect here.

And it is more than likely that this is just the calm before the storm. Until now, the banks have delayed wrestling with the debt legacy issue because they have simply not been forced to confront the issue. The new insolvency regime is likely to the the point when they are finally forced to confront reality, something that will probably be prompted by the ECB as it seeks to cut back on supplying low-cost emergency liquidity.

This marks the end of the phoney war between banks and their debtors. 2012 is the year when debtors and creditors alike will finally confront reality.

The revelation came at the January monthly meeting on Monday last in answer to a question from Clr. Joe Queenan asking if the council had private debt collectors collecting overdue accounts.

Head of Finance Marie Leydon said the council had engaged the services of Stubbs Gazette in collecting long overdue fire charges.

She explained that at the beginning of 2011, the council had over €700,000 outstanding in Fire Debtors from an accumulation of years since 2003. 162 debtors have been identified where amounts were long overdue and where the council had previously issued bills, reminders and solicitor warning letters.

“Our reasoning to engage Stubbs was that the name is universally recognised and other local authorities had experienced that the use of their demand letters had led to a number of arrears cases being cleared,” she said.

Director of Services Dorothy Clarke pointed out that the Fire Service did not charge for chimney fires or house fires but for attendance at emergencies such as road traffic accidents and oil spills.

Clr. Queenan said he thought that the manager could have at least told councillors about engaging Stubbs Gazette. He feared this would now be extended to water charges.

Clr. David Cawley said councillors were not involved in the council’s “operational matters” and he was “not going to get on the backs of officials” if they were trying to collect money where letters were ignored.

“If the council is employing people, having exhausted all other avenues, I have no problem with it,” he said.

Said Director of Services Tom Kilfeather; “This is a last resort. How can we resolve issues if people do not engage with us?”

The Sligo Champion: Wednesday January 25 2012

The journal reports that court judgements were registered against Nicholas and Pauline Keating of Haggard, Ramsgrange, New Ross and Richard and Niamh Walsh (t/a The Wishing Well) of No. 6, Craanford, Gorey.

Bank of Scotland, plc obtained a judgement for €769,765.97 against Richard and Pauline Keating and BWG Foods Ltd secured a judgement for €1,352.29 against Richard and Niamh Walsh.

Published since 1928, Stubbs Gazette provides information on money judgements and insolvency proceedings.

Source: Enniscorthy Guardian

It’s not the first time Mr Mockler has appeared in the pages of the Stubbs Gazette.

In January of last year they noted a judgment against him for €400,000 which he owed to Bank of Ireland and in September, they reported that he owed €149,000 to James Moriarity of 8 Cherryfield Road, Walkinstown, Dublin 12.

Source: Leinster Leader 24th Janaury 2012

DEVELOPER Paddy Kelly has been hit with a fresh debt order of almost €1m.

Mr Kelly, whose personal wealth was once valued at almost €2.7bn, was hit with the judgment by Ulster Bank.

The €990,000 debt was registered last Tuesday, just days before the non-NAMA lender unveiled details of almost 1,000 job cuts.

Mr Kelly, whose loans have been transferred to NAMA, has now had court judgments of more than €34m registered against him since 2009.

He was unavailable for comment last night.

Mr Kelly’s latest judgment will appear in next week’s edition of debt weekly Stubbs Gazette, which shows that the courts ordered debtors to repay debts of almost €10m during the first week of the new legal term.

The Ulster Bank judgment against Mr Kelly was the largest registered judgment.

The second largest sets of judgments were obtained by the country’s credit unions, which secured debt orders of €670,000 against 25 customers.

Athlone Credit Union was awarded the highest value judgment, which was for €97,340 against Thomas and Anne Doyle of Scrine, Rahara, Co Roscommon; while Clones Credit Union pursued architects Owen Finnegan of 76, Highfield, Carrickmacross, Co Monaghan and Breen Jackson of Clonee, Drumcondrath Road, Carrickmacross, Co Monaghan, for unpaid debts of €92,427.

Lombard Ireland Limited secured a judgment against Liam Scott of ‘The Hilltop’, Culleens, Co Sligo, and Liam Scott Construction Limited (in liquidation) for €805,315.

A check on Stubbs Credit Bureau revealed a litany of previous registered and unregistered judgments against Liam Scott and his company, for unpaid debts beginning in 2007.

JUDGEMENTS totaling almost €17 million have been registered in the High Court against two Clare company directors.

Details of the court decisions, published in this week’s edition of Stubbs Gazette, disclose that a judgement of €10,451,717.29 was registered against John Declan Flanagan of Ballyvarra House, Doolin and €6,419,133.91 against Gerard Lillis of Alva, Cree in the High Court on December 23.

Anglo Irish Bank had secured the judgement orders, arising from loans and guarantees of the liabilities of two property companies, Liscannor Properties Ltd and Atlantic Development Ltd, whose proposed schemes included a tax-driven hotel and a park-and-ride project at the Cliffs of Moher.

Anglo, who had previously appointed a receiver over properties of the companies, secured the order in the Commercial Court last November. A third named defendant, architect Ted Joyce of Ballina, Tipperary had a judgement of €3.35m recorded against him. The orders were made on consent of the three who had initially opposed the bank’s claim on grounds, including that Anglo effectively acted as partner and co-venturer with the companies.

All three had also counterclaimed over alleged breach of contract and agreements by the bank. It was alleged the bank had made representations that various loans, including for the hotel and park-and-ride facility, would involve the bank’s recourse being limited to property and having no recourse to investors. It was claimed the bank’s subsequent refusal to make finance available on a nonrecourse basis meant the defendants lost the benefit of the projects and suffered serious economic loss and damage.

The court heard a further claim that the bank had represented that it would not seek performance of the loans until the park-and-ride facility was operational. Anglo had denied the claims.

By Dearbhail McDonald Legal Editor

Tuesday January 03 2012

JUDGES have ordered debtors to pay back more than €8bn in bad debts since the onset of the recession, the Irish Independent has learned.

However, much of the soured debt, described as the tip of the iceberg, will simply never be recovered.

The courts are now experiencing a “second wave” of judgments as banks and creditors move on from processing high-priority, high-value property debts to other bad debtors including companies that are struggling with cashflow and obtaining credit.

Analysis of the debt data also shows:

- Public servants, medical personnel and hospitality workers are least likely to be pursued through the courts.

- 70 judgments were registered against solicitors and barristers last year.

- 285 publicans and retailers had judgments registered against them in 2011.

While the total amount of debt last year was pushed up by judgments against individuals including Sean Quinn, defaults on smaller loans are rapidly increasing.

Defaults on homeloans and personal borrowings such as credit cards and car loans are adding to the unprecedented number of court judgments.

Registered

In 2007, a total of 3,224 judgments worth €81m were registered. However, this rose to €3.97bn last year when 7,242 judgments were secured. The total amount of soured debt between 2007 and 2011 has now reached €8.186bn.

The second wave will see an estimated €4bn to €7bn a year in Nama-related judgments alone obtained in the courts in the next three to five years, according to credit bureau BusinessPro.

The publishers of ‘Stubbs Gazette’, which compiled Ireland‘s court debt figures between 2007 and 2011, has predicted “a tsunami” of Nama-related debt.

The Nama debt, combined with record levels of personal debt defaults, will send Ireland’s debt levels “off the charts” the debt reporting and recovery agency said.

The figures reveal that civil servants, who comprised just 0.39pc of all court debtors last year, are the least likely group of borrowers to be pursued through the courts.

“Either public servants are remarkably conservative or they are remarkably well-off individuals in terms of the national average,” said James Treacy, managing director of BusinessPro.

In 2007, the courts ordered 3,224 debtors to repay €81m to banks, the Revenue Commissioners, credit unions and other creditors.

But that figure soared to €628m in 2009, €3.42bn in 2010 and almost €4bn last year.

Last year’s debt levels peaked as a result of late judgments obtained against Mr Quinn, property developers Ray and Danny Grehan, of Glenkerrin Homes, and hotelier Jim Mansfield.

Mr Quinn filed for bankruptcy last November after the Irish Bank Resolution Corporation (formerly Anglo Irish Bank) obtained two judgments in excess of €2bn against him.

A county by county breakdown of debt has also revealed that no part of the country has been immune from the financial crisis with counties such as Mayo, Meath, Monaghan, Sligo, Tipperary and Wicklow carrying large debt burdens.

The court-ordered debt figures are published as the Government is put under increased pressure to reform Ireland’s archaic bankruptcy and personal insolvency laws to help struggling homeowners and debtors.

The Government is required to introduce new laws as part of the EU/IMF/ECB deal.

You ain’t seen nothing yet: comment, page 23

- Dearbhail McDonald Legal Editor

EVERYTHING is relative and it says much about the sheer scale of current levels of bad debt that the spectacular judgments of not so long ago now seem like mere footnotes in monetary terms.

Back in 2007, a solicitor named Michael Lynn had a judgment registered against him of just over €1.7m, which ranked among the top 10 judgments of that year. He also absconded to Portugal.

While the debtors of 2011 lack Mr Lynn’s badness, they still have the capacity to take the breath away.

Towering over them all is Sean Quinn with two judgments totalling in excess of €2bn in favour of the Irish Bank Resolution Corporation.

The chart of judgment debt values suggests two conclusions.

First, the jump in value between 2009 and 2010 is staggering (true). Second, that the jump between 2010 and 2011 is smaller and that this means the worst is over (false).

In fact, we are still at a relatively early stage in the process of washing out bad debt from the system.

Take 2010: that year was notable for the judgments secured against the Cork property quartet of Michael Conway Snr, Michael Conway Jnr, Kieran Conway and Paudie Dennehy. Their joint and several liabilities of over a billion euro — or around €236m apiece — inflated that year’s total, otherwise the total for 2010 would have been at least €600m less.

But it is 2011 that really bears scrutiny as this is the year when NAMA registered its first judgments of note — relatively late in the year — in its pursuit of the Grehan brothers and Jim Mansfield.

This is the start of a second wave of judgments on a massive scale. When it comes to predicting the trajectory for future years, all roads lead to NAMA and the evidence is that we will have to recalibrate the scale on the chart to take account of the deluge of NAMA-related bad debt that is approaching like a tsunami.

NAMA purchased loans with an original book value of €77bn, at a 40pc discount, for €54bn. We now know that €46.2bn of the original loans are non-performing.

NAMA has only registered six judgments so far in its existence: expect that number to rocket in the next 12 months.

At ‘Stubbs Gazette’, we predict that at least €20bn of non-performing NAMA loans will wind up in the courts over the next three to five years.

So, at least €4bn-€7bn in NAMA-related judgments alone will be baseline to yearly figures before a single other judgment from any bank or other creditor is counted.

Given the economic prospects for the country — which now look increasingly bleak following the third quarter contraction of 2011 — the NAMA baseline will be supplemented by record levels of debt default elsewhere. The net result will be off the chart.

Of course, property is the consistent theme throughout the past few years as far as judgments are concerned.

This is not immediately apparent from analysis of the occupations of the debtors, but it can be taken that the descriptions “gentleman” and “businessman” contain many such speculators — professional and amateur — whose investments collapsed around them.

One notable feature of the occupational analysis is the extraordinary low rate of judgments attributable to public servants (just 0.39pc in 2011).

Given that public servants comprise some 30pc of the workforce, this indicates that the level of judgments in this sector is running at 1pc of what it should be (although it can be taken that some public servants are included in the “gentleman” category).

But perhaps the biggest story behind the numbers is the sheer carelessness of creditors.

The Conways-plus-Dennehy of Cork story tells its own extraordinary tale. Here were three banks — Ulster, Bank of Ireland and Anglo — all of which lent sums ranging from €38m to €135m, but none of which appeared to cross-check this particular group’s exposure.

Even worse was the Lynn case. Here was a man whose track record in default would have been well known to any person who bothered to check.

The extraordinary fact is that Mr Lynn was by no means alone in his ability to get credit despite his unsuitability. We expect many more such examples over the next few years.

James Treacy is managing director of ‘BusinessPro’/'StubbsGazette’

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