Speaking at a Free Legal Aid Centres conference on personal insolvency, Paul Joyce, a senior policy researcher with Flac, said past governments had sought to “defy logic” by not implementing legislation on the issue and now there was a hostage to fortune in the shape of the “moral hazard” argument.
Government proposals in the Personal Insolvency Bill outline three schemes before a possible court application for bankruptcy.
However, Mr Joyce said there were “big stumbling blocks” to debt settlement arrangements and personal insolvency arrangements in the form of the levels of approval required of secured and unsecured creditors — meaning that in many cases plans could be vetoed.
He also said the Government’s plan to have a three-year bankruptcy discharge period, with a possible five-year period of income payments, was in effect an eight year stretch and “more draconian” than schemes in England and Wales.
Another speaker, Jason Kilborn, went further and said many of the provisions in the bill could prove “counter-productive”.
Mr Kilborn called for different ways of resolving the issues of personal insolvency and debt, so that “scarce state resources are not being expended on enforcement actions” which he said were often fruitless.
More negotiated settlements needed to be agreed, he said, with the possibility that the Central Bank could assume the role of its French counterpart in facilitating these agreements if and where possible.
He said bankruptcy should not be an easy option, but should be used in a situations where it meant debtors would not be “under the thumb” of creditors and in a situation where there was no incentive for them to work, take risks, and help improve the economy.
He added such measures would mean society would bear less of the overall cost of indebtedness and insolvency, particularly as most debtors were often victims.
He added that there must be “reasonable, consistent and uniform application of income payment orders”.
He described government plans as having a chance of limited success, while Mr Joyce said if there was widespread creditor veto on schemes then the plans were likely to fail.
Joan Burton, minister for social protection, said the current crisis here was beset by the “twin evils” of debt and unemployment.
“We do not want families to sink under the weight of debt and the fear of losing their homes,” she said.
The minister said new laws were needed as the current regime, in which it takes 12 years to discharge bankruptcy, meant it was a “lifetime impact”.
“What we should aspire to is a resolution between debtor and creditor.
“That is what our regime at the moment does not provide for.”