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Carol Hunt : Debt would be a release next to this travesty

'Tu ne peux pas, ou tu ne veux pas?" You can't or you won't? is what French parents say when dealing with difficult children. Author Margaret Atwood uses it in her book Payback and I was reminded of it repeatedly last week amid all the coverage of our supposedly radical Personal Insolvency Bill.



Perhaps the volume of texts and emails merited it, but did RTE really have to concentrate so much on the indignant horror of those who never borrowed a penny in their life; never set foot in a bank; still live with mammy and still have their communion money in a tin under the bed?

Do we really have such a large number of people living in the country who are so disgusted at the thought of their destitute neighbours getting a break?

I wouldn't have thought so, but that's how it came across on air. Never a word about "reckless lenders" -- but that seems to be the times we live in.

So, the Personal Insolvency Bill . . . Is it good news? Will it release all those hundreds of thousands of Irish families from their crucifying mountain of debt?

In summary, there are four proffered solutions.

The first involves a Debt Relief Certificate, for people with unsecured debts of under €20,000. In order to avail of this, you'd have to prove that you only have €60 disposable income left at the end of the month and less than €400 in assets, so it will most likely be aimed at the unemployed.

The second is a Debt Settlement Arrangement for debts of over €20,000, which may or may not include mortgages.

The third option is the Personal Insolvency Arrangement. This is for debts between €20,000 and €3m and includes mortgages.

And the fourth is the new Bankruptcy Law, which has been lowered to a period of three rather than 12 years -- although it still remains two years higher than our closest neighbours.

But what, I hear you ask, is being done about negative equity? Or about officially acknowledging that the lender and debtor have a shared responsibility?

Eh, feck all, is the short answer.

Yet there are hundreds of thousands of households out there in mortgage and personal debt arrears who need to know if they can avail of these measures.

Who will decide?

According to Tanaiste Eamon Gilmore, the bill is "not some kind of voluntary optional arrangement for the banks".

But the Personal Insolvency Arrangement (option 3), which I imagine will be the one of most interest to indebted households paying scandalous mortgages, needs to have the approval of 65 per cent of creditors. In most cases, that's the banks. It also appears they will be able to harass and control you for at least six years and can still apply to the courts to bankrupt you at any time if they so choose.

Can we depend on banks to play fair? Why should they? They've already learnt that the Government will only "suggest" rather than "demand" measures from them. Are they really going to start writing off mortgage debt and allow people to stay in their homes?

I hate to be unduly pessimistic, but, Eamon, I really can't see this happening.

But then, perhaps I'm wrong. I most certainly hope so. In the immediate aftermath of the release of this bill there seems to be cautious approval mixed with an awful lot of confusion. So, I looked at the Irish Economy blog to see if any one of the eggheads there could shed a bit more light on these proposals.

A contributor called ObsessiveMathFreak meticulously takes us through each and every aspect of the Personal Insolvency Arrangements and my worst suspicions are realised.

From the fine print he correctly, in my opinion, deduces that Personal Insolvency Arrangements are "simply a formalisation of the existing system of private agreements between mortgage holders and banks. There is no additional protection provided for mortgage holders, apart from the fig leaf of the Insolvency Service".

One has to wonder who advised the Government on this bill. The same people who wrote The Keane Report? Those who never bothered to consult with Mabs or New Beginnings or any of the agencies who work with distressed mortgage holders? From the way it overwhelmingly favours the banks above the debtor, it would seem so. Cui bono?

Surprise, surprise, it's the banks. So, all those indignant people can now stop calling up the national broadcaster and screaming "moral hazard". It's not going to happen -- the banks, recapitalised by us to deal with mortgage writedown -- are still getting away with it.

Which begs the question: what on earth is the point of the Personal Insolvency Arrangement? If you currently hold debts under €3m which you are unable to service, what would you do? You'd go and negotiate with your bank and try to come to some sort of arrangement, wouldn't you? And the bank would either agree to write off some of your debt or it would not.

Now, with the proposed legislation the only thing that has changed is the introduction of a whole new layer of quangos, complete with pensions and perks just so the Government can look as if it is doing something -- when in reality it's just throwing shapes.

Ah, now I get it.

Sunday Independent