It promised to hit the ground running and the new Irish Government will soon be a hundred days in office. It has committed to making many changes so perhaps now is the time to ask some questions as to what it is doing for the ordinary citizen as distinct from what it is doing in relation to banks, developers, NAMA and sovereign interest rates in its admittedly strenuous efforts to meet its committed EU and IMF performance targets.
Question One: will it publish a timetable for the publication of its legislative programme relating to personal insolvency measures? We know that the EU & IMF have imposed a deadline of March 2012 for new Irish personal insolvency laws to be in place. A blueprint of a month by month process for fast tracking the reform of bankruptcy laws and enacting new personal insolvency legislation would provide clarity for citizens.
Question Two: how long will it take the Law Reform Commission (LRC) to draft legislative proposals for reform of bankruptcy law? Will the LRC have to go through the same lengthy process of study, research and widespread consultation on bankruptcy before publishing a final report (with draft legislation) as it has already done in regard to unsecured personal debt – ‘Personal Debt Management and Debt Enforcement’, published in December 2010?
Question Three: Is the government aware that the LRC included draft legislation entitled ‘Draft Insolvency Bill 2010’ as an appendix to its final report in December 2010? Can this legislation be fast tracked into law? Why does an incoming administration need to slowly and painstakingly ‘review’ the outstanding work done by the LRC before deciding to propose and enact legislation? What particular expertise is the government going to bring to bear in such a review, given that the deliberations of the LRC encompassed extensive expertise from both the public and private sectors?
Question Four: What do government ministers individually and collectively understand as ‘personal debt forgiveness’? Why do current government ministers repeat the mantra of the previously discredited Fianna Fail / Greens government that government does not have the right to ‘forgive’ the debt of individual citizens? Compare recent utterances from the new Minister for Jobs, Enterprise and Innovation Richard Bruton with those of former justice minister Dermot Ahern in this regard. Do Irish government ministers really believe that laws in other jurisdictions, such as the UK Insolvency Act 1986, were enacted illegally and unconstitutionally and that the provisions contained therein in regard to Individual Voluntary Arrangements were not fundamentally grounded on the principle of debt forgiveness? Why must Irish law differ from our European neighbours?
Question Five: What do government ministers and indeed politicians of all ranks and parties understand as the risk of ‘moral hazard’, in relation to the idea of personal debt forgiveness? Why is the fear of ‘moral hazard’ a barrier to the introduction of personal insolvency legislation? Or is the wooly understanding of the concept of ‘moral hazard’ just an excuse for inaction? Has the ‘moral hazard’ risk in Ireland been benchmarked with the risks in other countries, particularly the UK? If it is not deemed to be an issue elsewhere, what is it about Ireland that makes ‘moral hazard’ such a high profile problem for government here?
Question Six: Why is the main focus in Ireland on issues related to secured personal debt (e.g. mortgages and car HP) and much less focused on unsecured personal debt (credit cards, overdrafts, personal loans)? The non court based debt settlement scheme mooted by the LRC would allow insolvent citizens to address their unsecured debts in a manner very similar to the tried and tested Individual Voluntary Arrangement (IVA) scheme in the UK. Why not bring in this legislation now? Why the delay until March 2012, the deadline set by the EU and the IMF?
Question Seven: The master of the High Court, Edmund Honahan has expressed his opinion that people in the Department of Finance do not understand the law (relating to insolvency) and that people in the Department of Justice do not understand economics or finance. If this is indeed the case, what hope is there that appropriate personal debt insolvency legislation will ever see the light of day? Who’s for a Department of Insolvency with expertise from both departments and from the private sector? Although there is not as yet a regulated professional insolvency qualification in Ireland it is likely that the legal and accountancy professions have sufficient professional expertise to provide a robust framework for the early implementation of the non court based debt settlement scheme proposed by the LRC. The LRC study in personal insolvency used and consulted with many experts from relevant public and private sectors and yet it appears that the new government may sit on its hands until next year before enacting new personal insolvency legislation and reforming bankruptcy law. Perhaps that is a little unfair after less than 100 days in office but time will tell.
Question Eight: why do creditors (banks, finance houses, other creditors) pursue debtors through the courts for judgments relating to debts which have already been written off in their books (and perhaps tax write offs availed of) and which have no realistic chance of being satisfied by debtors who have no assets and no meaningful disposable income? Do such creditors believe they have a legal or moral obligation (to their shareholders) to pursue such debts for ever?
Question Nine: why do creditors seek to register (additional) charges (usually in respect of unsecured liabilities) on debtors’ assets, mainly family homes, where such assets are in negative equity and have no prospect of being in positive equity in the foreseeable future?
Question Ten: does the new government appreciate the resource constraints under which the Money Advice and Budgeting Service (MABS) has been operating? While it is undoubtedly doing a good job, financial and manpower constraints mean that the citizen has to get in line for a limited service which essentially amounts to just a first step in personal debt management. The service is taxpayer funded and can hardly develop or grow much further given the government’s policy of downsizing the public service. Perhaps now is an opportune time to invite expertise from the private sector to offer commercial insolvency services to the public along the lines of the regulated and highly successful IVA and Debt Management Plan (DMP) services sectors in the UK.