5 Years Bankruptcy Duration in Eire
Justice Minister Alan Shatter has just published the details of the Civil Law (Miscellaneous Provisions) Bill which will have the effect of reducing the term of bankruptcy in Ireland. Bankrupts under the proposed new law will 'enjoy' automatic release from bankruptcy after twelve years but will be legally entitled to apply for release from bankruptcy after five years.
If the subject was not so grave, the new government's first, fumbling and feeble endeavours at reform of Ireland's draconian and arcane bankruptcy laws would be laughable. The unfortunate justice minister, in whose remit this thorny issue lies, has given in to the urge to earn some brownie points for the new coalition government by just trying something - anything - in the sector of personal insolvency but the step is such a timid and tiny one that all it is likely to (deservedly) get from the domestic and worldwide business community is ridicule and scorn and the story will simply be viewed as yet another cute sound bite.
It's not fully very clear precisely why the government is kicking this particular can down the line and through so doing give the apparent perception that they are buying time. Besides, under the terms of the EU/IMF/ECB bailout, the government is legally required to upgrade Ireland's personal insolvency laws and bring in new laws by March 2012. There is also the problem of an forthcoming High Court challenge to Ireland's arcane bankruptcy laws which was predicted just lately by Maeve Sheehan in a recent article in The Sunday Independent. The challenge was supposedly to be put together on the basis of alleged breaches of the constitutional rights of persons contending with bankruptcy. Might it be that the minister's announcement was prepared in order to weaken the validity of the projected challenge? To be fair to the new Fine Gael - Labour coalition government, it has started to act on the issue of individual insolvency inside of four months of taking office in contrast to the inertia and inaction of the previous Fianna Fail - Greens government, which wasnt able to get its collective heads around the idea of personal debt forgiveness and who only just sat on their hands for many years.
Professionals offered what could at best be depicted as a cautious welcome to the government's announcement presumably in the expectation of there being a real hope that it is truly just the first of a great many measures waiting to be taken. The Law Reform Commission (LRC) has pretty much carried out all of the hard work. The research has been conducted. Business experts have been used both at home and overseas. A variety of international jurisdictions have been checked out and benchmarked. The finance and insolvency sectors have supplied their wisdom. The LRC released its final report Personal Debt Management and Debt Enforcement in December 2010. The LRC proposes that any new Irish insolvency legislation must emphasize the 'fresh start' vision upon which much of the very best European and American personal insolvency legislation relies.
The LRC has already selected the most pressing and critical changes needed relating to the Bankruptcy Act 1988. In fact the proposed new act (currently named the Draft Personal Insolvency Bill 2010) and the old Bankruptcy Act 1988 (needing urgent reform and change) are so intricately intertwined that it is illogical to pass new laws without concurrently (or as contemporaneously as is feasible) amending the old act.
The reform of the Bankruptcy Act 1988 as proposed by the LRC is wide reaching and essential. It recommends laying down a minimum level of liabilities of Euro 50,000 before a lender may petition for the bankruptcy of an insolvent debtor. It also suggests the removal of the requirement that the insolvent debtor own accessible assets of not less than Euro 1,920 before they can by themselves petition for bankruptcy. The LRC wants the court to be empowered to look at the debtor's insolvency and to stop proceedings to allow the borrower to attempt a Debt Settlement Arrangement (DSA) - as envisaged and detailed in the new draft act. It wants to see the establishment of a Pre-Action Protocol that would cover a creditor's petition for bankruptcy and would oblige the debtor and lenders to look into other potential solutions for instance a DSA before embarking on the bankruptcy approach. The court would also be empowered to halt bankruptcy proceedings to make available enough time for the consideration of different means in the event of a debtor's petition for bankruptcy, with matching obligations and powers as under the Pre-Action Protocol. The court would set conditions for the automatic release of the bankruptcy and allow discharge before all of the bankrupt's resources had been realized. It could limit the automatic release timeframe to three years and demand repayments by the bankrupt for up to five years. The powers of the court would encompass release from bankruptcy and responding to objections to release by the Official Assignee/Personal Insolvency Trustee. The requirement to settle expenses, fees etc prior to release would be removed. The specification of priority debts e.g. Revenue obligations would be revised. The LRC also suggested that sanctions against dishonest and/or irresponsible bankrupts, such as restrictions and disqualifications be set. It recommended that particular assets would be exempt from the bankruptcy so as to ensure a reasonable living standard for the bankrupt. And finally it advocated that conditions be identified and fixed for the appointing and licensing of a new office holder titled Personal Insolvency Trustee acting in bankruptcy, with the new licensing system to be overseen by a (new) Debt Settlement Office.
Not everybody welcomes these types of significant changes and there's no shortage of advice or even lobbying by vested interests which include banks and financial institutions. Plainly any level of personal debt forgiveness as distinct from forbearance will have a adverse impact on the bottom line of banks and other lenders. Bad debts must be crystallized and bad debt provisions will have to be boosted. Countless different viewpoints have been expressed by so many commentators and lobbyists which range from economic 'experts' to solicitors to accounting firms to bankers. They wax lyrically on matters for instance moral hazard, can't-pay versus won't-pay, and other such red herrings while the financial suffering of the insolvent citizen in Ireland goes predominantly unheeded. Incredibly senior civil servants have labeled the proposed reform of Irish insolvency law as unfair because it is 'very debtor friendly'! While admitting that numerous Irish people have outstanding debts that they'll never reasonably have the capacity to repay, the thought of personal debt forgiveness is rejected on the spurious grounds that it is not just the banks and other big credit houses which will suffer difficulty, but also many regular small businesses and self employed people such as tradespeople, small builders, architects and other individuals who may possibly be left behind without repayment by defaulting debtors whose obligations may have been 'forgiven'.
So has the work of the LRC all been in vain and a squandering of taxpayer's money? Minister, you must grasp the nettle and quickly create the changes so urgently desired. The time for analysis and consultation is finished. You and your government were elected to enact new and good legislation. Don't be a laughing stock. Become a champion for all the people including the financially troubled masses who would like more than forbearance - they want forgiveness and the opportunity of a new start in Ireland. Now is the time to take action.
If the subject was not so grave, the new government's first, fumbling and feeble endeavours at reform of Ireland's draconian and arcane bankruptcy laws would be laughable. The unfortunate justice minister, in whose remit this thorny issue lies, has given in to the urge to earn some brownie points for the new coalition government by just trying something - anything - in the sector of personal insolvency but the step is such a timid and tiny one that all it is likely to (deservedly) get from the domestic and worldwide business community is ridicule and scorn and the story will simply be viewed as yet another cute sound bite.
It's not fully very clear precisely why the government is kicking this particular can down the line and through so doing give the apparent perception that they are buying time. Besides, under the terms of the EU/IMF/ECB bailout, the government is legally required to upgrade Ireland's personal insolvency laws and bring in new laws by March 2012. There is also the problem of an forthcoming High Court challenge to Ireland's arcane bankruptcy laws which was predicted just lately by Maeve Sheehan in a recent article in The Sunday Independent. The challenge was supposedly to be put together on the basis of alleged breaches of the constitutional rights of persons contending with bankruptcy. Might it be that the minister's announcement was prepared in order to weaken the validity of the projected challenge? To be fair to the new Fine Gael - Labour coalition government, it has started to act on the issue of individual insolvency inside of four months of taking office in contrast to the inertia and inaction of the previous Fianna Fail - Greens government, which wasnt able to get its collective heads around the idea of personal debt forgiveness and who only just sat on their hands for many years.
Professionals offered what could at best be depicted as a cautious welcome to the government's announcement presumably in the expectation of there being a real hope that it is truly just the first of a great many measures waiting to be taken. The Law Reform Commission (LRC) has pretty much carried out all of the hard work. The research has been conducted. Business experts have been used both at home and overseas. A variety of international jurisdictions have been checked out and benchmarked. The finance and insolvency sectors have supplied their wisdom. The LRC released its final report Personal Debt Management and Debt Enforcement in December 2010. The LRC proposes that any new Irish insolvency legislation must emphasize the 'fresh start' vision upon which much of the very best European and American personal insolvency legislation relies.
The LRC has already selected the most pressing and critical changes needed relating to the Bankruptcy Act 1988. In fact the proposed new act (currently named the Draft Personal Insolvency Bill 2010) and the old Bankruptcy Act 1988 (needing urgent reform and change) are so intricately intertwined that it is illogical to pass new laws without concurrently (or as contemporaneously as is feasible) amending the old act.
The reform of the Bankruptcy Act 1988 as proposed by the LRC is wide reaching and essential. It recommends laying down a minimum level of liabilities of Euro 50,000 before a lender may petition for the bankruptcy of an insolvent debtor. It also suggests the removal of the requirement that the insolvent debtor own accessible assets of not less than Euro 1,920 before they can by themselves petition for bankruptcy. The LRC wants the court to be empowered to look at the debtor's insolvency and to stop proceedings to allow the borrower to attempt a Debt Settlement Arrangement (DSA) - as envisaged and detailed in the new draft act. It wants to see the establishment of a Pre-Action Protocol that would cover a creditor's petition for bankruptcy and would oblige the debtor and lenders to look into other potential solutions for instance a DSA before embarking on the bankruptcy approach. The court would also be empowered to halt bankruptcy proceedings to make available enough time for the consideration of different means in the event of a debtor's petition for bankruptcy, with matching obligations and powers as under the Pre-Action Protocol. The court would set conditions for the automatic release of the bankruptcy and allow discharge before all of the bankrupt's resources had been realized. It could limit the automatic release timeframe to three years and demand repayments by the bankrupt for up to five years. The powers of the court would encompass release from bankruptcy and responding to objections to release by the Official Assignee/Personal Insolvency Trustee. The requirement to settle expenses, fees etc prior to release would be removed. The specification of priority debts e.g. Revenue obligations would be revised. The LRC also suggested that sanctions against dishonest and/or irresponsible bankrupts, such as restrictions and disqualifications be set. It recommended that particular assets would be exempt from the bankruptcy so as to ensure a reasonable living standard for the bankrupt. And finally it advocated that conditions be identified and fixed for the appointing and licensing of a new office holder titled Personal Insolvency Trustee acting in bankruptcy, with the new licensing system to be overseen by a (new) Debt Settlement Office.
Not everybody welcomes these types of significant changes and there's no shortage of advice or even lobbying by vested interests which include banks and financial institutions. Plainly any level of personal debt forgiveness as distinct from forbearance will have a adverse impact on the bottom line of banks and other lenders. Bad debts must be crystallized and bad debt provisions will have to be boosted. Countless different viewpoints have been expressed by so many commentators and lobbyists which range from economic 'experts' to solicitors to accounting firms to bankers. They wax lyrically on matters for instance moral hazard, can't-pay versus won't-pay, and other such red herrings while the financial suffering of the insolvent citizen in Ireland goes predominantly unheeded. Incredibly senior civil servants have labeled the proposed reform of Irish insolvency law as unfair because it is 'very debtor friendly'! While admitting that numerous Irish people have outstanding debts that they'll never reasonably have the capacity to repay, the thought of personal debt forgiveness is rejected on the spurious grounds that it is not just the banks and other big credit houses which will suffer difficulty, but also many regular small businesses and self employed people such as tradespeople, small builders, architects and other individuals who may possibly be left behind without repayment by defaulting debtors whose obligations may have been 'forgiven'.
So has the work of the LRC all been in vain and a squandering of taxpayer's money? Minister, you must grasp the nettle and quickly create the changes so urgently desired. The time for analysis and consultation is finished. You and your government were elected to enact new and good legislation. Don't be a laughing stock. Become a champion for all the people including the financially troubled masses who would like more than forbearance - they want forgiveness and the opportunity of a new start in Ireland. Now is the time to take action.
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