Editorial: Insolvency law needs constant evaluation
Published 04/02/2014 | 02:30
THE inexcusable delay, pre- and post-crisis, of putting into place a modern debt-resolution regime, guaranteed a certain level of 'build-up' in the system. The record number of bankruptcies, in one High Court sitting, therefore, does not come as a major surprise.
What is significant, even in the early days of the operation of the new Personal Insolvency Act, is the low take-up of debt settlement arrangements notwithstanding the level of personal and business indebtedness.
It is also significant that it is debtors who are electing to bankrupt themselves rather than their creditors.
A significant number of bankruptcies are inevitable, indeed welcome, to deal with debts that are beyond any meaningful resolution.
Those numbers will continue to climb as a result of new measures to reduce the bankruptcy discharge period from 12 to three years and reducing associated costs.
But there are worrying signs that the new debt resolution regime may not be fit for purpose.
The Government has, to its credit, acknowledged the teething problems – primarily technical and bureaucratic – that the new Insolvency Service of Ireland (ISI) is experiencing.
Justice Minister Alan Shatter has convened a special meeting of personal insolvency practitioners (PIPs) this month to try and develop new protocols for debtors and creditors.
But already debtors, many of whom are living below ISI guidelines or who have been hit by higher taxes and lower pay, are being priced out of debt settlement options.
The irony now is that people who are in debt cannot afford arrangements designed to alleviate their difficulties.
The new law requires constant evaluation, particularly with regard to the strong veto enjoyed by banks, as more and more people struggle to manage their obligations amid higher taxes and reduced pay.
A certain amount of bankruptcy is inevitable, but Government policy shouldn't steer people towards the option of last resort.