The first insolvency deal agreed yesterday is the day troubled borrowers have been waiting for for a long time and will be the beginning of the long awaited relief for borrowers that has long been promised.
The importance of the first insolvency deal goes beyond the fact that the system is finally in play and useful for some borrowers. It will show too the banks that their power is now very much diminished and if they do not do voluntary deals with genuinely distressed borrowers there are other real options now available which will result in 70%+ write offs.
The long awaited power shift from banks to borrowers is well and truly on the move. It will gather momentum as more people realise they will be able to get the reliefs needed from personal insolvency.
The options then for the banks is going to be do they let people go all the way through insolvency and have the costs of that process reduce their payout or cut their losses and do quicker less costly voluntary deals outside of the personal insolvency regime.
The next step in the debt relief process is the implementation of the new bankruptcy regime which will give even more power to the borrower and in turn give a greater incentive to the banks to do deal they should have been forced to do 3 years ago.
Paul C Carroll