Wave of personal debt cases swamping courts

From the Indo

http://www.independent.ie/national-news/wave-of-personal-debt-cases-swamping-courts-3054756.html

THE courts system is bursting at the seams trying to cope with an avalanche of personal debt cases, an investigation by the Irish Independent can reveal today.

Thousands of cases involving people who cannot meet loan repayments for cars or building extensions and those who let their credit card get out of control are swamping the system.

Trying to recover debts in court is hugely expensive, legal experts admitted.

They also said the system was not working for either householders hauled before the courts or companies trying to recover money they are owed.

Our investigation found that people from all walks of life are now ending up before a judge for failing to pay debts.

These include small farmers, former successful business people, tradesmen and those who never held down a job, who are all being hauled into court for defaulting on debts.

Courts are being forced to deal with record numbers of debt cases.

And it is clear ordinary people have no idea how the court system works -- creating stress and confusion as well as risking imprisonment.

Last year, 30,000 people had judgments issued against them for failing to pay off debts to banks, credit unions and car finance companies, figures from the Courts Service reveal.

Judges are reluctant to jail those who owe money, particularly if these people can't pay.

In a number of instances judges struck out cases against banks and credit unions because solicitors knew little about the background of those they were pursuing.

More often than not those facing the prospect of having a judgment issued against them failed to turn up in court.

The same was true of those who did not pay the judgment.

That left judges in the dark about how much they could then afford to pay off the debt in weekly or monthly amounts.

One judge, who spoke on condition of anonymity, revealed: "I don't commit people to prison for failing to pay small debts, especially if they are not able to pay." Banks, finance companies and credit card companies are often the real culprits, in the view of this judge.

But he reserved particular criticisms for the lending activities of credit unions, even though they are owned by their members and redistribute profits.

"Credit unions in particular lavished money on people for the likes of house extensions. It is extraordinary the amount of money that was loaned out.

"Many of the people who got the loans were never in a position to pay back in the first place," he said.

The likes of Bank of Ireland, AIB, Permanent TSB and Friends First finance featured in many cases during the course of this investigation.

Paul Joyce, senior policy researcher with the Free Legal Advice Centres (FLAC), said the system was not working for householders who ended up in court, or for finance firms trying to recover money.

He said it was "daft" for judges to be forced to decide how much someone could repay every week on a debt when that person did not turn up in court and was not represented.

Often there were multiple debts. People did not turn up in court because they were intimidated by the legal process or were burying their heads in the sand, he said.

Insolvency expert Bill Holohan said attempting to recover debts through the courts was a race to see which creditor would get into court first.

He said the system was dated and was not serving consumers or creditors.

Mr Holohan, who has written textbooks on insolvency, said if a consumer was smart they would not turn up in court. This was because judges were reluctant to make orders to force people to pay weekly amounts in the absence of information on their income or means.

- Charlie Weston Personal Finance Editor