It looks like the term of yet another Fianna Fail led coalition government in Ireland will have passed without the passage of any legislation to address the issues of personal insolvency. While the Law Reform Commission (LRC) has carried out Trojan work on the issues of personal debt, culminating in the publication of consultation papers, interim reports and recommendations for legislation, it appears that the current government has neither the will nor the energy to enact the necessary laws.
The tragedy is that the LRC did not even include ‘bankruptcy’ within the scope of its terms of reference, recognizing the size of the elephant in the room at an early stage. It did of course advocate the urgent need for major reform of the bankruptcy laws.
Instead the LRC focused on advocating an IVA type solution for personal indebtedness in Ireland, similar to the system successfully operating in the UK including of course Northern Ireland. So in spite of the LRC biting off what it could comfortably chew and generally excluding the consideration of bankruptcy from its deliberations, the government has failed to bring forward any legislation and now looks increasingly unlikely to do so, given the fiscal and sovereign debt crisis it is now facing and the growing instability of the government.
What is even more disheartening for Irish citizens is that ministers seem to have failed to grasp the ‘second chance philosophy’ which underpins insolvency legislation nowadays in most enlightened European jurisdictions and particularly in the United States. Ministers have little to say about these matters save some grumbling sound bites claiming that the government does not have the right to pass laws that write off or forgive debt. The point is that nobody is asking the government to pass such laws. In other jurisdictions it is the creditors who have the (voting) power to agree to write off debt or not. It should not be too much to expect though that the legislature can put a framework of insolvency legislation in place with proper oversight and regulation but operated by creditors. The recurrent references by ministers and indeed other politicians to the subject of ‘moral hazard’ also displays a dearth of understanding of insolvency and of many tried and trusted solutions.
In enlightened jurisdictions such as America, some of the greatest entrepreneurs of the last century were able to overcome problems of insolvency and bankruptcy in their businesses and bounce back incredibly successfully. Celia Larkin, former partner of former Irish Prime Minister Bertie Aherne, in an enlightened and far seeing article in the Sunday Independent recently, called for urgent and immediate reform of the Bankruptcy laws in Ireland quoting the examples of Donald Trump, Henry J. Heinz and Henry Ford who were remarkably successful, given a second chance.
Any fair body of legislation should focus on the positive approach of the second chance for potential entrepreneurs and even for the ordinary citizen. The ‘punishment’ mindset which Ireland’s draconian bankruptcy laws incorporate should be banished forever.
Time is not on the side of the debtor who is about to lose his or her home and may already have lost their employment. The studies have been done, other countries’ systems have been trawled over, the reports and recommendations have been published. It is now time to act and to enact good insolvency law.