Clune: Unforgiving bankruptcy laws need to change

THE country’s punitive bankruptcy laws must change to encourage more people to get involved in business.

“There is no forgiveness in Ireland for business people who try hard to succeed but end up having to file for bankruptcy,” said Fine Gael’s spokeswoman on Innovation, Deirdre Clune TD.

Bankruptcy is seen as the result of money mismanagement or fraud and where those who have worked hard but failed are given little support.

When a business person is declared bankrupt, they cannot get a loan for more than €630 without disclosing they are bankrupt.

They risk losing their homes and have to live with the bankruptcy tag for 12 years under the existing law, she said.

That has to change and the stigma that has been attached to legitimate business failure, she said.

Both the Innovation Task Force and the Law Reform Commission have recommended substantial changes in the law that goes back to 1988, she said.

It is out of line with best practice in Europe where the declarations last for just five years.

We should look to the North where people can work through their financial difficulties without losing all of their property, she said.

It is a question of balance and we have to have “a penalty for financial mismanagement or fraud and there must be some balance for the creditors involved”, she said.

“We need to change our laws to ensure that the declaration of bankruptcy works as an efficient way of collecting debt owed, and that bankruptcy does not become something that is a means of relief for reckless business investments,” she said.

When being self employed offers the only alternative to the dole, new legislation is needed to encourage people and others with business flair to go out and take risks, she said.

Research has shown that well structured bankruptcy laws have a very positive impact on the level of self-employment.

Enlightened laws have also proven to be a bigger contributor to high levels of self-employment more than other factors such as GDP growth, she said.

“Bankruptcy should be a penalty for debts owed, but not a life-long punishment for business mistakes that could be the cornerstone of future success,” she said.