Doctors and judges forced to sell trophy homes or face bankruptcy
Irish Independent, Monday, 6 October 2014
There has been a surge in informal insolvency deals amongst Ireland’s professional classes following the introduction of new personal insolvency laws and the sale of non performing loan books to so called vulture funds.
Despite the crackdown, however, new data released to the Irish Independent confirms that banks took a “softly, softly” approach to Ireland’s former high rolling professionals since the onset of the recession.
An analysis of court judgments against professionals such as lawyers, accountants and architects show that banks have enforced just €434m against 813 professionals since 2008, a sample which includes debt orders against doctors, civil servants, nurses and gardai.
Almost half (370) of the sample surveyed by credit agency Stubbs Gazette were secured against solicitors, some of whom defrauded banks and clients and many others who engaged in soured property deals.
But Stubbs Gazette CEO James Treacy, who has predicted a “tsunami” of insolvencies against Ireland’s hard pressed middle class, said that the rate of court judgments against Ireland’s professionals should “be at least five times higher”. “We are only seeing the tip of the iceberg in terms of distress among the professional classes,” said Mr Treacy.
“The figures show that either professionals have been highly astute in keeping creditors off their backs or that creditors have been holding back on enforcement.
"That is bound to change, particularly in Dublin".
Read more: Comment: The dam is about to burst for professional classes
Banks have traditionally shied away from enforcing judgments against professionals because it affects their ability to earn and service their bank debts.
But as property prices recover and vulture funds clean up non performing loan books, professionals - many of whom are banned from practising if they are bankrupt or do not have tax clearance certificates - are seeking informal debt deals to avoid formal insolvency.
The introduction, two years ago, of new insolvency laws, has led to a surge in informal insolvency deals by professionals anxious to avoid restrictions on their practice in the event of going bankrupt.
The Irish Independent has learned that one judge narrowly avoided enforcement after he agreed to stop paying private school fees, while others have held creditor meetings to manage their debt as members of the judiciary can not serve without full tax clearance.
Individual stockbrokers who took part in multi-million euro property syndicates and borrowed to invest have also taken advice as to whether debt deals could affect their fitness to practice.
Next week the Insolvency Service of Ireland (ISI) will launch a national information roadshow to inform debtors about their options amid concerns there has been a slow uptake of insolvency by overstretched debtors.
Stubbs says that it expects to see judgments against the professional classes increase by at least 100pc over the next year, as many of these debts have been taken over by the so called vulture funds.
"These guys don't hang around and like to get a quick return on their investment," said Mr Treacy.
Last week the Irish Independent revealed that bodies representing accountants, pharmacists and vets are also seeking rule changes to allow insolvent members to continue to work.
David Hall of the Irish Mortgage Holders Association (IMHO) said that professionals such as barristers and financiers are "suffering" because of the uncertainty over their employment status if they face up to their indebtedness.
"A lot of professionals subsidised their lifestyles with rental income and now those interest only periods have ended," said Mr Hall. "The professions need clarity and maturity from their regulatory bodies to move on with their lives".
The Law Society, the ruling body for solicitors, says it has imposed restrictions - including bans on accessing client funds - on the practising certificates of solicitors who have been adjudicated bankrupt, have had court judgments issued against them or have entered into a personal insolvency arrangement (PIA).
"The Law Society seeks to ensure that safeguards are put in place to protect client monies held by solicitors while still, if appropriate, permitting the solicitor to continue to practice," it said in a statement.
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