As the Irish presidential race heats up I have been disappointed to find that not one of the seven candidates has touched upon an issue of crucial importance to a society currently under great pressure. Ireland's bankruptcy laws are archaic in comparison to our UK counterparts' and are not afforded the attention they deserve by either the media or our politicians. I continue to be astonished by this country's approach to bankruptcy, which does much to exacerbate the financial woes of Irish debtors.
In Ireland personal bankruptcy has traditionally been associated with fraud and financial mismanagement and the law represents this mindset. Applicants are penalised for a full twelve years after a declaration of bankruptcy. Even prior to the recession these laws were clearly unreasonable. In the aftermath of the economic downturn this approach is causing immeasurable harm by neglecting to allow for the thousands of people who, when faced with a harsh negative equity policy and rising unemployment rates, have amounted unavoidable debts over the last five years.
That personal debt in this country has reached epidemic proportions is unarguable. The organisations that currently exist to assist the public in debt management and bankruptcy advice are massively oversubscribed. In their Pre-Budget Submission of this year MABS, the Government-funded Money Advice and Budgeting Service, reported that the average debt of their clients has grown from just over E6,990 in 2006 to E16,937 by the third quarter of 2009. The Free Legal Advice Centre has experienced a 100% increase in debt related legal queries from the general public in the past year.
The average person assumes that bankruptcy is a last resort out of their debt, a way out when all is lost and their debts reach a point where repayment is no longer viable. Unfortunately Irish bankruptcy laws mean that there is no way out; no person of sound mind would willingly freeze their ability to make any money for a full twelve years, particularly anyone between 25 and 45 who is in the prime of their money-making life. MABS actively advises its clients to ignore bankruptcy as an option regardless of the size if their debt. This situation is frankly ridiculous; punishing a bankruptcy applicant for a full twelve years is both cruel to the individual of no help to the rest of society. Releasing a person from bankruptcy is actually of benefit to the economy as at least it allows them to re-enter the market as a worker and consumer.
No other developed nation applies such a punitive approach to individuals in serious debt. US and UK laws provide for the possibility of a bankruptcy discharge period of one year. Cost and ease of access alone also pose difficulties for the Irish debtor. Irish bankruptcy applicants must be able to pay the expenses of the Official Assignee, the costs of the petitioning creditor and any other preferential payments owed. In the UK, people can file for bankruptcy online. In Ireland it involves a High Court proceeding.
Recent proposals for reform in this area still fall short of providing a fair and equitable form of relief for indebted individuals. The Civil Law (Miscellaneous Provisions) Bill 2010 proposes to change the minimum period of time after which a person declared bankrupt may apply to have the bankruptcy discharged from twelve years to six. Yet six years is still an excessive length of time to penalise an applicant; not only does it strangle their ability to rehabilitate their finances for more than half a decade, but it as mentioned above it prevents them from re-entering the market as a spender and thus asset to the economy. The Bill proposes that the same criteria apply for the six-year period as currently do for the twelve-year period - the assets of the applicant must also be totally realised and the same costs and difficulty of access apply.
The Law Reform Commission's proposals on personal debt envisage a far more comprehensive reform and are worth reading, but these are mere proposals - a Bill has yet to be introduced. This should be condemned given that Ireland's IMF bailout included a condition requiring the Government to modernise our bankruptcy laws by the first quarter of 2012.