The Law Reform Commission (also known as LRC) in Ireland set up an expert group to make recommendations for reform of Irish law relating to personal debt. It has reported back strongly recommending setting up a Debt Settlement System which would be characterised by the following general approach and considerations:
- Adopt a ‘whole of Government’ approach to the legislation, involving all relevant departments and Agencies to debt settlement systems, both judicial (bankruptcy) and non-judicial.
- Set appropriate qualification for entry to the ‘non-judicial debt settlement system’ (NJDSS). Presumably this relates to the honesty and insolvency of the debtor, for example.
- The NJDSS to be affordable in regard to costs, fees, taxes etc.
- The NJDSS to be accessible and easy to understand.
- Set appropriate non-punitive time limits and conditions relating to the discharge of the debtor from bankruptcy and from NJDSS.
- Enable the debtor to achieve an ‘fresh start’ and a ‘repaired’ credit rating provided he or she made all efforts to comply in good faith with the terms of the debt settlement agreement in the NJDSS.
- Ensure protection for the property rights of creditors.
- No creditors including Revenue to be treated preferentially in regard to payments and all (unsecured) creditors to rank equally for dividend.
- Determine the restrictions applying to the debtor in bankruptcy or in the NJDSS relating to engaging in business, obtaining credit, being elected to or holding public office, etc. Presumably consideration is to be given and the legislation is to reflect restrictions both pre-discharge and post-discharge.
- Develop and incorporate in the legislation appropriate enforcement mechanisms.
- Ensure avoidance of potential misuse of any new insolvency arrangements or system.
The report also recommended that the Debt Settlement Systems be characterised by the following specific considerations:
- At least 60% of (unsecured) creditors, by value, have to vote in favour of the proposed scheme for it to be approved and binding on all (unsecured) creditors.
- The debt discharge period should be related to the quantum of debt outstanding with a larger quantum of debt having a longer discharge period than a smaller one.
- Where a debtor subject to a debt settlement arrangement refuses to abide by the agreement, creditors would have the right to pursue other legal remedies, including an application to the court either to have the debt enforced or to have the debtor declared bankrupt.