The Law Reform Commission (LRC) of Ireland has just published its final report on personal debt in Ireland and in the dying days of the Fianna Fail – Greens coalition government, it includes a Draft Personal Insolvency Bill 2010 which truly lives up to the promise of earlier publications from the LRC. The proposals contained in the draft bill are quite radical. They say, for example, that debtors should not be jailed for non-payment of debt even in instances where the debtor can afford to pay but refuses to do so. The proposed sanction is community service and not jail time.
This is not the only radical proposal. The draft bill provides for what is effectively debt forgiveness although the term ‘forgiveness’ is avoided like the plague. In fact in the 440 page report it appears only three times and two of those are quotations from other sources. It appears that the report adheres to the letter of Justice Minister Dermot Ahern’s words when he ruled out ‘debt forgiveness’ for ordinary people in May of this year at the publication of the LRC’s interim report.
The LRC however has shown considerable courage in ensuring that the spirit of its final report and the draft bill contain copious amounts of provisions which amount to nothing if not debt forgiveness – shout it from the rooftops! In particular the proposals for insolvent debtors with no income and no assets (NINA) provide for what are described as Debt Relief Orders. In effect qualifying debtors will be able to have their unsecured debts totally written off within a twelve months period so that they can start afresh. It is likely that there will be a ceiling on the total quantum of debts above which this relief would not be available for the insolvent debtor but this is not set out at this point. (In the UK the ceiling is £15,000).
The principal provision is the setting up of a Debt Settlement Arrangement (DSA) scheme where insolvent debtors would pay what they could afford for a period not exceeding five years, after which the unpaid balances of their debts would be discharged in their entirety. Under this scheme at least 60% of voting creditors as measured by the value of unsecured debts would have to approve the DSA for it to be approved and binding on all unsecured creditors, including those who chose not to vote on the proposal.
Other provisions include:
- Set up a Debt Enforcement Office (DEO) to arrange non-judicial settlement of debts
- Set up a Debt Settlement Office to license and monitor insolvency practitioners, to be known as Personal Insolvency Trustees
- Institute a regulatory regime to control debt collection and debt advice bodies
It remains to be seen if the current Irish Government will have the time, energy and inclination to enact the legislation needed to give effect to the proposals contained in the LRC’s final report and to pass its Draft Personal Insolvency Bill 2010, given that their Christmas vacation commences today and they don’t resume until mid January 2011 with a general election likely to be called in the early spring.