Bankruptcies to rise a hundred-fold – Shatter
THE number of people going bankrupt will jump a hundred-fold next year as new legislation takes effect, Justice Minister Alan Shatter has said.
Mr Shatter told the Seanad that he expects around 3,000 people to make bankruptcy applications next year as new insolvency laws come into effect to allow people to write off debts of less than €3m.
That compares with about 30 bankruptcy adjudications in 2011.
While that figure is a "tentative estimate", Mr Shatter added that he also expected another 15,000 applications from people who wanted to use two other methods to write off smaller debts that don't involve the courts.
"I expect a significant number of persons to seek to avail of the new or reformed insolvency processes," Mr Shatter told senators.
"However, it is difficult to be precise, as it will very much depend on individual circumstances and the nature and extent of the debts involved."
Mr Shatter confirmed fears that the new bankruptcy regime would not start until next year, although he insisted yesterday that the relevant legislation could be passed by the end of December.
He reiterated that the bankruptcy process would be overseen by former Deloitte restructuring expert Lorcan O'Connor, who will head up a new agency called the Insolvency Service of Ireland.
But Mr Shatter added that the new quango would not be operational until the first quarter of 2013.
"While I recognise the concerns of those who want an immediate introduction, I must ensure that all necessary procedures are in place for the service to commence operations," he said.
NCB stockbrokers said in a report earlier this week that overseas investors often asked questions about Ireland's new bankruptcy laws and often fretted that the laws would make it difficult for banks to return to profit.
The NCB report predicted that the system would not become operational until the first quarter and warned that those delays meant that investors wouldn't know until next summer whether the new bankruptcy laws were working.
Passage of the bankruptcy legislation has been sluggish since the troika first ordered the Government to reform the present system, which is so harsh that it does not work in practice.
Details of the new law were first published in January amid disagreements between the Departments of Justice and Finance as well as the troika.
Finance Minister Michael Noonan revealed recently that the Government had originally wanted the legislation to help people with debts of up to €10m.
The troika wanted a figure of €1m and both sides agreed to a compromise of €3m, although the figure can be increased if all sides in a bankruptcy agree.
Mr Shatter said yesterday that he would introduce further changes at the committee stage, which will follow yesterday's second reading.
He took a swipe at the banks, saying that they "have been reluctant to date to engage in a definitive or realistic manner with borrowers who may be overwhelmed by unsustainable debt".
The new legislation will encourage realistic engagement and "will have to include, where circumstances warrant, some debt forgiveness", he added.