Neo Financial Solutions

Personal Insolvency Bill 2012

The Personal Insolvency Bill 2012 was published yesterday without the usual fanfare associated with our current government’s announcements about their attempts to fix our broken state. The announcement was somewhat overshadowed with the (another) seismic shift by the EU on another form of debt relief  … Bank Debts …. Let’s all recognise debt forgiveness is alive and well but just not it seems for the ordinary person!

As some commentators have already stated the banks fingerprints are all over this bill which I would agree with. I also see that the finger prints of our privileged professional classes are also all over the bill too. Items which are unnecessary but included such as the necessity for an annual review of a personal insolvency arrangement (PIA) and many court filings smack of professional fee generating schemes and not adding any particular value to the process or to the debtors situation.

I would have several concerns with the bill as it currently is, the first of which is the amount of time a person who makes one of the 3 proposed arrangements available with their creditors is tied up in the arrangement. The time can be anything from 3 years in the case of very small arrangements under the Debt Relief Notice (DRN) to 7 years in a Personal Insolvency Arrangement (PIA). Is it really in the ordinary persons interest to be tied up for such a long time given that they have faced up to their debt issues and just want to get on with their lives?

Another major concern is with the position of strength of the creditors in all of the arrangements where at least 50% and in some cases 65% of all creditors have to agree to the arrangement. This effectively gives the creditor (in most cases the bank) control and we know they just inflect more hardship when they are in charge.

A very worrying aspect of the bill is the ability of a creditor to claw back some debt previously written off! So after the ordinary person puts themselves and their family through one of the arrangements, suffers the stress, worry and loss invariably suffered from the process. Then has some bit of good luck, in say 4 years time after the arrangement is made, most likely after a lot of hard work the bank is the one to gain from the good fortune! What kind of debt resolution is that?

The most positive aspect of the bill is the reduction of the term of bankruptcy, if someone takes the ultimate plunge, from 12 to 3 years. After the 3 year term is up there is an automatic discharge. The 3 year term is longer than the 1 year term in Northern Ireland and the UK but it is progress. Given the terms and length of the 3 proposed arrangements in the bill anyone with significant debts maybe better off  just go ahead with declaring bankruptcy and the 7 year ‘sentence’, annual reviews and possible claw back imposed by the so called arrangements could be avoided.

Paul C Carroll Accountant, Neo Financial Solutions, 01 4370908