Debtors ordered to repay over €8bn

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.

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- Dearbhail McDonald Legal Editor