ISI Statistics Quarter 1 215 ISI Tackling problem debt together
Insolvency Service of Ireland Quarter 1 215 Table of Contents 1 Foreword... 4 2 Case Management DRN, DSA, PIA... 5 2.1 Increase in Protective Certificates and Arrangements... 6 3 Percentage of debt to be written off under a DSA or a PIA... 7 4 Creditor Acceptance/Rejection... 7 5 PIP Support Initiative... 9 5.1 Summary of claims... 9 5.2 Analysis of claims... 1 5.3 PIP Support Initiative claims for failed PIAs in Q4... 11 5.4 PIP Support Initiative claims for failed DSAs in Q4... 11 6 Qualifying Debt DRN, DSA, PIA... 12 7 Applicant Profile DRN, DSA, PIA (since launch)... 13 8 Bankruptcy... 14 9 Treatment of Family Homes in Bankruptcy... 16 9.1 Background... 16 9.2 Survey... 17 1 Regulation... 19 Appendix Data Tables... 2 Insolvency Service of Ireland Statistics Quarter 1 215 Page 2
THE DEBT RELIEF NOTICE (DRN) PROVIDES FOR THE WRITE OFF OF QUALIFYING DEBT UP TO 2,, SUBJECT TO A 3 YEAR SUPERVISION PERIOD. THE DEBT SETTLEMENT ARRANGEMENT (DSA) PROVIDES FOR THE AGREED SETTLEMENT OF UNSECURED DEBT WITH NO LIMITS INVOLVED OVER A PERIOD, NORMALLY EXPECTED TO BE 5 YEARS. THE PERSONAL INSOLVENCY ARRANGEMENT (PIA) PROVIDES FOR THE RESTRUCTURING OR SETTLEMENT OF SECURED DEBT UP TO 3M AND THE SETTLEMENT OF UNSECURED DEBT OVER A PERIOD, NORMALLY EXPECTED TO BE 6 YEARS. IN THE CASE OF A DSA OR PIA, AFTER A PROTECTIVE CERTIFICATE ISSUES, PERSONAL INSOLVENCY PRACTITIONERS (PIPS) WILL HAVE 7 DAYS IN WHICH TO DEVELOP AN ARRANGEMENT. Insolvency Service of Ireland Statistics Quarter 1 215 Page 3
1 Foreword I am pleased to publish the statistical report of the Insolvency Service of Ireland (ISI) covering the first quarter of 215 (Q1). The last quarter of saw a significant increase in activity levels, as a result of the launch of the Back on Track information campaign and the waiving of all ISI fees. Q1 has seen further growth. There have been more new cases, more protective certificates, more finalised arrangements and more bankruptcies than in any previous quarter. This report contains two new sections covering: An analysis of cases that were rejected by creditors, and An analysis of the status of family homes for those that were declared bankrupt in These analyses show that creditors face the potential loss of more than 1, per rejected arrangement and that in 7% of cases, bankrupts will either lose or do not intend to remain in their family homes. The ISI is working closely with Government Departments during the current review of personal insolvency matters. The outcome of this review should increase activity levels further. In addition, a new Protocol on the Personal Insolvency Arrangement (PIA), the solution that deals with mortgage debt, has been agreed with stakeholders. This should contribute to an increased take-up of this solution, which aims to keep the debtor in their family home. Details of the PIA Protocol are available on the ISI website, in the protocol section. Lorcan O'Connor Director April 215 These statistics are for information purposes only. No person should place reliance on the accuracy of the statistics, nor should they act solely based on them. The statistics are primarily based upon cases created by duly authorised Approved Intermediaries and Personal Insolvency Practitioners on the ISI Case Management System, the official registers of Approved Intermediaries and Personal Insolvency Practitioners and the statement of affairs submitted by those seeking to be declared bankrupt. Figures cover the period 1 January 215 to 31 March 215, unless otherwise stated. Insolvency Service of Ireland Statistics Quarter 1 215 Page 4
2 Case Management DRN, DSA, PIA 525 new applications in Q1 213 applications since launch 6 5 DRN DSA PIA Total 525 25 2 DRN DSA PIA Total 4 15 3 2 31 1 5 1 112 13 215 Q1 Sep 213 Nov 213 Jan Mar May Jul Sep Nov Jan 215 Mar 215 324 Protective Certificates in Q1 996 Protective Certificatess since launch 35 3 DSA PIA Total 324 12 1 DSA PIA Total 25 8 2 234 6 15 4 1 5 9 215 Q1 2 Sep 213 Nov 213 Jan Mar May Jul Sep Nov Jan 215 Mar 215 273 arrangements in Q1 821 arrangements since launch 3 25 DRN DSA PIA Total 273 1 8 DRN DSA PIA Total 2 6 15 1 5 11 43 215 Q1 129 4 2 Sep 213 Nov 213 Jan Mar May Jul Sep Nov Jan 215 Mar 215 Insolvency Service of Ireland Statistics Quarter 1 215 Page 5
2.1 Increase in Protective Certificates and Arrangements Since the ISI began accepting applications, Personal Insolvency Practitioners and Approved Intermediaries have created more than 2, cases. These numbers do not include cases created on the ISI system and subsequently withdrawn. Approved arrangements reflect the number of proposals approved by creditors and/or Court. Q1 applications by County - DRN, DSA, PIA 91 73 14 6 11 15 3 7 29 8 9 5 16 8 28 1 27 3 1 4 5 2 37 11 21 27 Q1 applications - DRN, DSA, PIA (per 1, population) 3.25 2.56.82.94 1.75.93.57 1.2.48 1.38 1.12.84 1.57.83 2.28 2.5.77 1.47.5 1.3.62.76 1.26 1.45 1.28 1.98 1.14 Note: Population data taken from the Central Statistics Office Population of each County and City, 211 Available on their website at http://www.cso.ie/multiquicktables/quicktables.aspx?id=cna23 Insolvency Service of Ireland Statistics Quarter 1 215 Page 6
3 Percentage of debt to be written off under a DSA or a PIA The table below sets out the average percentage and the range of debt to be written-off within DSA and PIA arrangements since commencement. Type of Debt Average Min: Range Max: PIA PIA - secured debt 22.2%.% 88.% PIA - unsecured debt 83.1%.% 99.9% DSA DSA - unsecured debt 76.4%.% 99.9% 4 Creditor Acceptance/Rejection The ISI has undertaken an analysis of protective certificates issued and the extent to which they have led to a solution that has returned insolvent debtors to solvency. Once a protective certificate has issued, one of the following outcomes is possible: PIP successfully uses the protective certificate period of 7 days to reach agreement between the debtor and his or her creditors. This is ultimately reflected in a 'YES' vote at a creditors meeting PIP identifies and implements an alternative solution for the debtor that does not necessitate a DSA or PIA. No creditors meeting or vote is held PIP is unsuccessful in reaching an agreement between the debtor and his or her creditors. This is ultimately reflected in a 'NO' vote at a creditors meeting or, if the PIP is of the view that a 'NO' vote is inevitable, the PIP may not proceed with a creditors meeting In collating these figures, where a protective certificate has expired and the ISI is unaware of the outcome, it is assumed that an alternative solution has not been put in place. This conservative approach may be overstating the cases that have been unsuccessful. Acceptance rates in Q1 are higher than in for both DSAs and PIAs. Insolvency Service of Ireland Statistics Quarter 1 215 Page 7
Creditor Acceptance/Rejection (from 213 Q4 to 215 Q1) Rejected prior to creditors meeting Protective Certificate expired No vote Alternative solutions Yes vote DSA PIA Total YES YES vote 83.9% 7.9% 74.4% Alternative solution 1.2% 1.5% 1.4% Successful outcome 85.1% 72.4% 75.8% NO vote 11.9% 24.4% 21.1% NO Rejected prior to creditors meeting.% 1.5% 1.1% Protective Certificate expired 3.% 1.7% 2.% Unsuccessful outcome 14.9% 27.6% 24.2% Insolvency Service of Ireland Statistics Quarter 1 215 Page 8
5 PIP Support Initiative Personal Insolvency Practitioners (PIPs) can, on a quarterly basis, seek a 75 support payment from the ISI in respect of any arrangement that has been rejected by creditors - on condition that the arrangement must have proposed a return to all creditors that was greater than or equal to that which they would receive in bankruptcy. The objective behind this initiative was to encourage greater engagement between banks and PIPs. The ISI committed to publishing details around any claims made under this initiative. Due to the fact that costs incurred by PIPs are far greater than the support payment available, the ISI is satisfied that PIPs are not encouraged to progress vexatious cases. 5.1 Summary of claims The initiative was launched in October. Due to the fact that it typically takes over 7 days for a case to reach a creditors vote, the full impact of this initiative will not be felt until later in 215. The analysis that follows is based on a small sample size of 47 cases that correspond to claims made by PIPs for Q4. The cost to the ISI to meet these claims was 35,25. The charts and tables on the following pages set out the votes from creditors in respect of cases where their vote had a material impact on the outcome of such cases. There were 52 such NO votes that had a material impact on the 47 cases. In making comparisons to bankruptcy, PIPs assume any secured properties are surrendered to the secured creditor in bankruptcy. The ISI will continue to update this analysis each quarter. Insolvency Service of Ireland Statistics Quarter 1 215 Page 9
Millions Thousands Millions 5.2 Analysis of claims The amount of debt involved in the 47 rejected cases exceeded 3 million. 25 Total debt (millions) 2 15 1 22.15M 5 - Secured 8.91M Unsecured The percentage return for both secured and unsecured creditors was better in the rejected arrangements, when compared to bankruptcy. 8% 7% 6% Average % return for secured creditor 1% 8% Average % return for unsecured creditor 5% 4% 3% 2% 1% % 68.18% Arrangement 44.9% Bankruptcy 6% 4% 2% % 8.59% Arrangement.63% Bankruptcy The overall potential loss for creditors voting NO is almost 5 million and averages more than 1, per case. 2 Total potential return/loss (millions) 4 Average potential return/loss per case (thousands) 15 3 1 5 15.1M 1.31M 2 1 321.28 219.43 - - 5-4.79M - - 1-11.85-1 Arrangement return Bankruptcy return Loss - 2 Arrangement return Bankruptcy return Loss Insolvency Service of Ireland Statistics Quarter 1 215 Page 1
Tables 5.3 and 5.4 list those creditors who had material votes in DSA and PIA proposals during Q4. A material vote is defined as a vote that had a direct influence on the outcome of a DSA or PIA proposal. The tables identify the frequency at which creditors exercise their right to vote against a proposal made by a PIP. The NO vote analysis only covers cases where PIPs have claimed under the 75 PIP Support Initiative. 5.3 PIP Support Initiative claims for failed PIAs in Q4 Creditors with material votes Number of NO votes % rejected by creditors Start Mortgages 8 8% PTSB / Springboard 16 48% Tanager 2 33% Bank of Ireland 6 21% Ulster Bank 6 19% AIB / EBS 8 14% KBC 3 1% AvantCard % Banco Popular Espanol SA % Bank of Scotland % Credit Unions % IBRC % Local Authorities % Pepper Group % Others* 2 22% Total 51 22% *Others include Kenmare Property Finance and Revenue 5.4 PIP Support Initiative claims for failed DSAs in Q4 Creditors with material votes Number of NO votes % rejected by creditors PTSB / Springboard 1 1% Ulster Bank % AIB / EBS / Haven % Aktiv Kapital UK % AvantCard % Bank of Ireland / ICS % Bank of Scotland % Cabot Financial % Credit Unions % GE Capital Woodchester % Intrum Justitia % Lombard Ireland % Revenue % Total 1 2% Insolvency Service of Ireland Statistics Quarter 1 215 Page 11
6 Qualifying Debt DRN, DSA, PIA 229 Million Qualifying Debt in Q1 Revenue Credit Union Trade Creditors Other* Financial Institutions PPR Mortgages BTL Mortgages *Other debt includes connected creditors, contingent debt, hire purchase, personal guarantees, utilities, store cards/catalogues and professional fees. The total debt involved in the 525 cases created in Q1 is more than 229 million. You can find a breakdown of the type of debt in the chart above and the table below. Type of Debt Amount % of total Principal Private Residence Mortgages 92.6m 4.17% Buy to Let Mortgages 87.82m 38.32% Financial Institutions 33.76m 14.73% Credit Union Debt 3.76m 1.64% Revenue Debt 3.75m 1.64% Trade Creditors 2.19m.96% Other Debt 5.83m 2.54% Total Qualifying Debt 229.17m 1.% Insolvency Service of Ireland Statistics Quarter 1 215 Page 12
7 Applicant Profile DRN, DSA, PIA (since launch) Occupation Status Student 1% Unemployed 26% Public Sector 1% Widow/er 1% Divorced/ Separated 13% Selfemployed 12% Other 3% Retired 3% Housewife/ Husband 5% Private Sector 4% Married/ Civil Partner 65% Single 21% 55-64 14% Age Profile of Debtors 65 + 3% 18-24 1% 25-34 11% Gender Female 48% Male 52% 45-54 32% 35-44 39% Interlocking (PIA only) 39% Types of Application An individual application is an application with a sole debtor. Where there are two (or more) debtors, who are jointly liable for all of the debts to be included in a DSA or a PIA arrangement, a joint application is appropriate. Joint (DSA, PIA) 3% Individual (DRN, DSA, PIA) 58% An interlocking application would be appropriate where two (or more) PIAs are to be administered in common; usually because of the financial relationship of the debtors involved. Examples would be a couple or business partners, where they are jointly liable for some - but not all - of the debts to be included in the PIA arrangement. Insolvency Service of Ireland Statistics Quarter 1 215 Page 13
8 Bankruptcy Bankruptcy Adjudications 5 45 4 35 3 25 2 15 1 5 448 137 147 162 162 98 66 Q1 Q2 Q3 Q4 215 Q1 215 The number of bankruptcies in Q1 215 is the highest on record for any quarter. This has been driven by the increase in debtor petitions, which in Q1 represents more than 94% of bankruptcies. In the past, the vast majority of bankruptcies were based on creditor petitions. 124 Million Bankruptcy Debt in Q1. Unsecured Debt 31% Secured Debt 69% The total debt involved in bankruptcy adjudications for 215 Q1 is more than 124 million. This is made up of 69% secured debt and 31% unsecured debt. In the case of secured debt, it is likely that current market values of securities are significantly below debt levels. Insolvency Service of Ireland Statistics Quarter 1 215 Page 14
Q1 Bankruptcies by County 3 25 25 2 19 15 1 5 2 1 7 6 4 1 11 1 3 8 1 5 9 12 1 4 2 2 6 5 4 6 8 Q1 Bankruptcies per 1, population.69.69.65.6.52.52.59.37.14.37.37.2.16.1.37.42.26.41.17.44.46.41.38.31.31.35 Note: Population data taken from the Central Statistics Office Population of each County and City, 211 Available on their website at http://www.cso.ie/multiquicktables/quicktables.aspx?id=cna23 Insolvency Service of Ireland Statistics Quarter 1 215 Page 15
9 Treatment of Family Homes in Bankruptcy 9.1 Background 1. Secured creditor options in bankruptcy In bankruptcy, a secured creditor has three options: Confirm whether they wish to rely on its security and remain outside the bankruptcy, or Abandon their security and claim in the bankruptcy for full debt (rarely occurs), or Realise the asset or value the security they hold and then claim in the bankruptcy for any balance owed in excess of the net proceeds received or the valuation (rarely occurs) 2. Official Assignee in Bankruptcy The functions of the Official Assignee in Bankruptcy are set out in section 61 of the Bankruptcy Act 1988 (the Act) and are essentially to validate ownership of the assets, to realise them and to distribute the proceeds thereof to creditors. In discharging these functions, the Official Assignee will sell or surrender buy to let properties, depending on whether or not there is equity in these properties. In relation to the family home, the Official Assignee is precluded from selling the interest that has vested in him, without first obtaining the permission of the High Court under section 61(4) of the Act. The Court may, on application under section 61(4), stay the order for sale for such period as the Court deems fit, having regard to the needs of the bankrupt and their dependents. 3. How family homes are dealt with in bankruptcy The policy of the Official Assignee in applying the legislation in relation to the family home is best explained by way of the various scenarios that may arise, some of which are detailed below. Scenario 1 - Family home in positive equity The Official Assignee will seek to realise the interest in the family home. He will always seek to sell the half interest in the family home to the spouse and will accept staged payments, to allow the spouse to purchase the property. In the event that the spouse is not in a position to buy out the interest of the bankrupt, the Official Assignee is obliged to put the family home up for sale, having first applied for permission of the High Court as outlined above. Insolvency Service of Ireland Statistics Quarter 1 215 Page 16
Scenario 2 Family home in negative equity Scenario 2a - Debtor loses family home - hands back the keys If the bankrupt does not want to stay in the family home, because they cannot afford the repayments, or cannot for whatever reason, enter into an arrangement with the mortgage holder/lending institution, they will surrender the family home for sale by the mortgage holder/lending institution. The sale would crystallise the negative equity in the property for the mortgage holder/lending institution, with the negative equity being written-off in bankruptcy. Scenario 2b - Debtor loses family home against their will If the bankrupt wishes to stay in the family home, they will first have to agree mortgage repayments that are acceptable to the mortgage holder/lending institution. Where the bankrupt has agreed such payments, they must then submit those payments to the Official Assignee for approval having regard to the Reasonable Living Expenses (RLEs) issued by the ISI. If no agreement can be reached, the bankrupt will be required to leave the family home and seek alternate accommodation, which will again crystallise the negative equity in the family home. Scenario 2c - Debtor remains in family home If the bankrupt wishes to stay in the family home and can agree terms that are acceptable to the mortgage holder/lending institution and the Official Assignee, the family home may be retained. In bankruptcy, with commitments to pay unsecured debts (e.g. bank personal loan, credit card, Credit Union loan) ceasing, the bankrupt s capacity to pay the mortgage may significantly increase. Furthermore, the Official Assignee will sell the interest that vested in him for 5, to the bankrupt or their spouse, and will allow them to pay by staged payments over 12 months. 9.2 Survey The table on the following page sets out the details of a survey undertaken by the Bankruptcy Division of the ISI in March 215. It looks at debtors who were declared bankrupt in and sets out what has happened, or is likely to happen to the family home of the bankrupt. The analysis shows that approximately 7% of bankrupts lose their homes in bankruptcy. The majority surrendered the family home prior to bankruptcy, such that bankruptcy in itself is not an intervening event that causes them to lose their family homes. Insolvency Service of Ireland Statistics Quarter 1 215 Page 17
Bankruptcies - Family Home Analysis Total bankruptcies 448 Less subsequent annulments -2 Less those who never owned a home (renting) -47 Less those who didn't respond to survey -16 Effective sample 383 1.% Family Home lost / Surrendered Bankrupts who have surrendered property 143 37.3% Bankrupts who have not yet lost their family home, but aren't paying mortgage and are likely to lose family their home in the future 112 29.3% Bankrupts whose family home has been repossessed 16 4.2% 7.8% Family Home retained / sold to connected party Bankrupts who have reached deal with bank to stay in home or are servicing mortgage in full 89 23.2% OA sold/selling interest to spouse (bankrupt remains in family home) 15 3.9% Bankrupts who have equity in the family home which the OA will realise (possibly to spouse, in which case bankrupt will remain in family home) 8 2.1% 29.2% Insolvency Service of Ireland Statistics Quarter 1 215 Page 18
1 Regulation There are 247 Personal Insolvency Practitioners and Responsible Persons available to meet debtors, on a face-to-face basis, to solve their debt problems. Personal Insolvency Practitioners 16 14 128 138 141 138 143 12 1 95 8 6 51 4 2 213 Q3 213 Q4 Q1 Q2 Q3 Q4 215 Q1 There are currently 143 Personal Insolvency Practitioners on the ISI register. Responsible Persons 12 1 87 94 99 14 8 73 6 55 4 35 2 213 Q3 213 Q4 Q1 Q2 Q3 Q4 215 Q1 46 MABS companies and the Irish Mortgage Holders Association (IMHO) have been authorised as Approved Intermediaries. There are 14 responsible persons linked to these authorisations. Insolvency Service of Ireland Statistics Quarter 1 215 Page 19
Appendix Data Tables Case Management PERIOD New Applications Protective Certificates Arrangements Approved TOTAL DRN DSA PIA TOTAL DSA PIA TOTAL DRN DSA PIA 213 Q4 112 29 83 11 5 6 1 1 Q1 318 75 59 184 59 24 35 55 44 6 5 Q2 324 76 58 19 152 46 16 124 67 3 27 Q3 314 77 55 182 18 31 149 131 61 22 48 Q4 42 77 88 255 27 52 218 237 79 39 119 215 Q1 525 112 13 31 324 9 234 273 11 43 129 213 112 29 83 11 5 6 1 1 1,376 35 26 811 661 153 58 547 251 97 199 215 525 112 13 31 324 9 234 273 11 43 129 Total 2,13 417 392 1,24 996 248 748 821 352 141 328 Percentage change; latest quarter compared with: Q4 25% 45% 17% 22% 2% 73% 7% 15% 28% 1% 8% Q1 65% 49% 75% 68% 449% 275% 569% 396% 13% 617% 248% Bankruptcy Period Adjudications Q1 66 Q2 98 Q3 137 Q4 147 215 Q1 162 213 58 448 215 162 Percentage change; latest quarter compared with: Q4 1% Q1 145% Insolvency Service of Ireland Statistics Quarter 1 215 Page 2
Information Line and Website Data Table Period Telephone Emails Website Visits Total Contacts Pageviews PDF Downloads Q2 213 1,828 725 34,611 37,164 23,487 11,21 Q3 213 2,96 95 5,83 54,695 281,66 17,58 Q4 213 2,326 339 31,198 33,863 173,567 9,836 Q1 2,814 498 38,645 41,957 229,38 13,15 Q2 2,852 639 32,231 35,722 212,758 9,462 Q3 2,513 825 32,16 35,498 23,19 6,36 Q4 3,186 1,41 4,737 44,964 248,51 6,639 Q1 215 4,41 1,47 65,559 7,647 277,346 14,245 213 7,114 1,969 116,639 125,722 658,66 38,617 11,365 3,3 143,773 158,141 92,667 35,611 215 4,41 1,47 65,559 7,647 277,346 14,245 Total 22,52 6,19 325,971 354,51 1,856,673 88,473 Insolvency Service of Ireland Statistics Quarter 1 215 Page 21