Insolvency deals not open to poorer families, says study
NEW State-backed insolvency deals will fail to lift large numbers of people out of debt, the first academic study of the system has concluded.
The findings come after accusations that the Insolvency Service has been set up mainly to benefit the professional classes, and is not for PAYE workers.
Critics have charged that the new process is set to be a rescue-mechanism for those with buy-to-lets, after the head of the service admitted that broke families that have no income and no assets they can sell off will be unable to avail of the new deals.
Now a 104-page research paper by legal expert Keith Farry has exposed huge flaws with the design of the Insolvency Service of Ireland (ISI).
Mr Farry has a first-class degree is law from NUI Galway and got a first-class masters degree in law from Trinity College for his paper on the new Insolvency Service.
He concludes that the new schemes are unlikely to meet their objectives of releasing families from crippling debts, a copy of the paper, seen by the Irish Independent, shows.
The Personal Insolvency Act 2012 made provision for the length of a bankruptcy to be reduced from 20 years to three years.
And it paved the way for the creation of personal insolvency arrangements (PIAs) for those with mortgages and other debts.
A PIA is court-backed deal, approved by the Insolvency Service. A PIA will last between five and seven years, and will lead to some debts written off at the end of the agreement.
Also being introduced are debt settlement arrangements (DSA), which are for debts that do not include mortgage borrowings, and debt relief notices.
Mr Farry, in his paper 'Bankruptcy in Ireland', concluded that "the three schemes as provided for in the legislation will fail to provide an efficacious solution for many of the current debt problems".
Insolvency Service boss Lorcan O'Connor has said the new service was open to everyone.
But he admitted that people with no income, other than social welfare, and no non-essential assets to sell, would be unable to get a new personal insolvency deal.