Indebtedness is civil not criminal offence, say experts

People struggling to pay personal debts should be dealt with out of court without the threat of jail, according to legal experts.

The Law Reform Commission wants an overhaul of bankruptcy and repayment rules, as well as tough controls on collection agencies to prevent criminality and harassment.

Community service should be the toughest penalty for people who cannot pay and even for those who will not pay, the group said.

Patricia Rickard-Clarke, commissioner with the LRC, said jail does not benefit anyone when debts are left hanging.

“We just feel, for debt, it‘s a civil breach not a criminal offence. Debt and non-repayment is a civil offence,” she said.

“There‘s the cost of sending people to prison and the debt still remains whenever they come out.

“It does not benefit the creditors and the people going to prison don‘t earn a living.”

The reforms would cover debts on credit cards, personal loans such as for cars, small business lending and overdrafts.

The commission will unveil its 440-page report and 200 recommendations to update personal debt enforcement laws at a conference in Dublin Castle today.

One of the key changes would see the judicial regime replaced by “efficient” and “cost-effective” debt enforcement offices to secure repayment deals with the interests of both the borrower and lender at heart.

A licensing system should be set up for debt collectors with voluntary codes of practice on a statutory footing and unprofessional and criminal agencies should be stopped.

On bankruptcy it wants significant changes with automatic discharge from a ban on business after three years and increase from 1,900 to 50,000 euro the minimum debt level required to bring a creditor’s bankruptcy petition.

She said: “We have a bankruptcy system that is punitively expensive and restrictive and not appropriate to the credit society we have been living in. It is used rarely, and other jurisdictions have bankruptcy as a last resort.”

The Government brought in new rules on non-payment of fines last summer but refused to include a “can‘t pay, won‘t pay” clause, abolishing the threat of jail.