What Irish Government Minister Might Champion the Indebted Citizen?

Just eight months in office now, the new Irish government, composed of a coalition of the Fine Gael and Labour parties, has started to make noises about the personal debt elephant in the room. Were it not for the EU-IMF requirement that laws in this area be passed by the time frame of the first quarter of 2012, it’s doubtful if anything would be done in the near future. Sitting on hands is not now an option yet who will push the necessary reform. The Green party was handed very little credit for pinpointing the gaping chasms in Irish insolvency legislation and for the release of the Law Reform Commission’s final report in December 2010. However time ran out for the Greens and they failed in their plans to enact any relevant legislation, mostly because of the lack of enthusiasm from their senior coalition partners, the now discredited Fianna Fail party who were preoccupied and in truth overpowered by the financial tsunami then engulfing Ireland, although it was essentially of their own making. The massive bailout negotiated with the IMF, ECB and EU took up a lot of the energy of the relevant government ministers and the worries of people in regard to their personal debt was parked while the financial and banking crises were tackled head on.

Time passed and a new Irish government came into power in March 2011. The Law Reform Commission (LRC) had finalized its task in December 2010 when it produced its final report on Personal Debt Management and Debt Enforcement and indeed it went a step further when it incorporated as an appendix to that report a Draft Insolvency Bill 2010. The hard work was carried out for the initially enthusiastic incoming government nevertheless one more year has nearly elapsed and no legislation is yet enacted, or even published. The comparison between the unnecessary rush in which the destructive decisions that delivered the bank bailout in September 2008 were made and the subsequent stalling by, it can now be said succeeding governments, concerning the enactment of personal insolvency legislation, is nothing short of scandalous. It appears that the travails of Sean Citizen must carry on while government is concerned with the consequences of the legacies of Sean Fitzpatrick et al who shattered the Irish banking system, while the financial regulator and the then government looked the other way.

The proposals in the draft bill are quite sweeping. They stated, for example, that debtors should not be jailed for non-payment of debt even in situations where the debtor could afford to pay but refused to do so and came up with less expensive sanctions such as performing community service instead of going to prison. That was not the sole radical proposal. The draft bill provided for what was effectively debt forgiveness even though the expression ‘debt forgiveness’ is pointedly sidestepped. In fact in the 440 page report it appeared only three times and two of those instances were quotations from other sources.

The LRC showed considerable courage in ensuring that the nature of its last report and the draft bill contain copious amounts of provisions which add up to nothing if not debt forgiveness. In particular the recommendations for insolvent debtors with no earnings and no assets (NINA) provide for what are referred to as Debt Relief Orders. Essentially qualifying individuals can have their unsecured liabilities completely written off within a one year interval to enable them to start out anew. It is likely that there will be a qualifying threshold on the total quantum of liabilities that an insolvent borrower may have and above that level, relief via a Debt Relief Order wouldn’t be available. In the UK the threshold is 15,000.

The principal provision would be the establishing of a Debt Settlement Arrangement (DSA) scheme where insolvent consumers would pay what they could manage for a time period not in excess of five years, after which the unpaid balances of their unsecured debts would be wiped out in their entirety. Under this scheme at least 60% of voting creditors as calculated by the value of unsecured debts would have to agree to the DSA for it to be approved and it would be binding on all unsecured lenders, including those who decided not to vote for or against the proposal.

Further important changes included the creating of a Debt Enforcement Office (DEO) to arrange non-judicial settlement of debts, the creating of a Debt Settlement Office (DSO) as an essential part of the DEO to license and monitor insolvency practitioners, to be known as Personal Insolvency Trustees and to create a regulatory regime to regulate debt collection and debt advice organisations.

It’s now clear that the new Fine Gael led government has to find the resolve, the energy and the urgency to enact the legislation which is so gravely necessary to give effect to the proposals contained in the LRC’s final report and to enact its Draft Personal Insolvency Bill 2010, or maybe a somewhat revised version of it. Looking at the different ministers, it is apparent that no minister is able and inclined to champion the task, even though cabinet responsibility falls squarely on the shoulders of the Minister for Justice, Alan Shatter.

Although the LRC itself originally ruled out detailed consideration of and recommendations for formulating or amending Irish Bankruptcy law from its scope and terms of reference, it has in fact and in spite of itself, made thirteen distinct recommendations relating to bankruptcy in an appendix to the report, as well as proclaiming clearly its recognition of the need to change the Bankruptcy Act 1988. A footnote to that appendix makes intriguing and somewhat incredulous reading:

‘The commission hasn’t included these provisions in the draft Personal Insolvency Bill in Appendix A as it understands that a new legislative framework to reform the Bankruptcy Act 1988 is currently (December 2010) under consideration’.

That footnote had political fingerprints all over it as it was patently clear from the LRC’s published work that as a body it was highly disenchanted with the lack of political progress in taking steps to tackle the reform of bankruptcy law. Due to the enormity of the task of reforming bankruptcy law, it could take years to achieve that goal, even if the entire resources of the LRC were to be devoted to the task. The term ‘the law’s delay’ can in these circumstances apply equally validly to delay in making and enacting legislation as to the original meaning of delay in the just execution or in the equitable enforcement of law.

It would be indeed astounding that Ireland’s draconian bankruptcy law, though almost never utilized at present, might continue to be unchanged as the law of the land for years to come. The IMF, ECB and the European Commission were able to descend on Dublin at short notice and in a matter of weeks agree measures to tackle the insolvency issues of the Irish banks and of the sovereign state itself. Unless the Fine Gael and Labour government shows considerably more competence, urgency and energy that its predecessors, the humble consumer is going to have to remain waiting for the provision of real legislative solutions for personal debt and personal insolvency.

If you’re battling with arrears and want Debt Relief in Ireland without going insolvent, call us at National Debt Relief.