Legal eagle: Laws have to change and come into line with other countries to reduce bankruptcy
Published 09/11/2010 | 05:00
What do you do if you are broke? I'm not talking about just being insolvent -- where your liabilities exceed your assets. In this case, you might still be able to survive if you have a good income stream which enables you to keep payments going on bank loans and the like.
You are really broke when your income stream also stops. Unfortunately, many Irish people are facing this situation at the moment. These people are technically bankrupt. But if you haven't yet gone through the legal process of declaring yourself bankrupt, should you consider it? The short answer in Ireland at the moment is definitely not. Why? Because if you have any interest at all in trying to start in business again you'll be barred from doing so for at least 12 years under existing Irish legislation.
There is a new piece of legislation drafted at the moment called the Civil Law Miscellaneous Provisions Bill of 2010 which proposes to reduce bankruptcy down to six years. But even this new legislation would not make it automatic that you come out of bankruptcy after six years. It would just mean that you would be in a position to apply to have your bankruptcy discharged or cancelled. Six years is still a very long time. In the UK you can seek to have your bankruptcy discharged or cancelled after 12 months and in the United States it is anything from four months to four years. Why therefore should it take 12 years in Ireland, even under the proposed new legislation? I heard it suggested recently that the Irish psyche wouldn't be able to cope with anything shorter than six years. The feeling was that the Irish psyche requires that someone who has gone bust should get a really hard time for at least six years before they are allowed to put their head up again. The feeling was that as a nation if somebody fails, there is a part of us that demands to see him or her get a really rough time for a while. I don't accept this notion of the Irish psyche and it does not at all reflect what I see with many businesses which have simply failed because we have had such a sudden recession. Yes, we all know the arguments about the developers, but let's forget about them for a moment. What about all of the small builders and all of the farmers who were encouraged by financial advisers to sweat their assets by borrowing money on the strength of the farm and perhaps buying a number of apartments or houses, all of which have now seriously decreased in value?
Can anyone seriously suggest that Irish people demand that such borrowers who have literally seen their assets and income stream fall off a cliff should be "bust" for years and years.
Our country has passed legislation which prevented banks themselves from going bust. This was done by introducing the National Assets Management Agency which is really the people of Ireland subsidising the banks. We must sensibly follow the NAMA legislation with personal debt forgiveness legislation.
So why reinvent the wheel by dreaming up some new form of debt forgiveness legislation? Why not fast track a complete overhaul of our existing bankruptcy system?