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Column: It’s not enough to help people in debt. We must look at the big picture

New legislation will help safeguard people struggling with debt – but they deserve to have their homes protected too, writes Noeleen Blackwell.

Noeline Blackwell Dublin Rape Crisis Centre

ON TUESDAY MARCH 6, the Joint Oireachtas Committee on Justice, Defence and Equality launched its report on the recently proposed draft Bill on personal insolvency and debt settlement.

The report, which went to the Minister for Justice, Alan Shatter TD, followed on a novel approach to discussing legislation where, in mid-January, Minister Shatter sent an outline of the Personal Insolvency Scheme to the Committee for their comments, thus allowing the committee – composed of TDs and Senators from all political parties as well as independents – to look at the plan proposed in this radical and far reaching piece of law before the text of the bill was settled. It was very useful to be able to do this – to concentrate on the thinking behind the bill rather than picking at a text.

In all, the Committee received 10 written submissions and invited seven groups to make oral presentations. In addition to hearing from Free Legal Advice Centres (FLAC), the Committee also heard presentations from the Department for Social Protection, MABS, the Irish Banking Federation, New Beginning, the Irish Society of Insolvency Practitioners and askaboutmoney.ie. Inevitably, these put forward a wide range of views. However, having considered the presentations and reviewed its own materials, the Joint Oireachtas Committee seems to have come to some broad, general conclusions in its report to the Minister.

While it contains few firm recommendations, one of the report’s proposals is that there must be a “holistic” approach to debt settlement that encompasses secured and non-secured debt. The Banking Federation, amongst others, had suggested that secured debt, such as mortgages, be excluded.

The Committee’s report firmly points the Minister towards affording protection for people’s family homes; it also recognises the widely held concern that the scheme as presented does not contain an appeal mechanism and therefore, less asset-rich debtors could be particularly disadvantaged by intractable creditors. As the report puts it, “there was broad agreement that it is essential that there be a binding consequence for a creditor who acts in an unreasonable manner”.

Bankruptcy tourism

The report will also flag for Minister Shatter the difficulties with some of the thresholds and time limits initially suggested in the draft scheme of legislation. It points out that there is a Europe-wide bankruptcy regime and, in particular, that the UK, our nearest neighbour, has the potential to release a person from bankruptcy after a year. The committee warns that that Ireland’s laws need to take that into account.

Particularly, it is concerned that under the proposed scheme, while a bankruptcy can last for three years , there could be a further five-year clawback period, and recommends that this be reduced substantially. It also wants the Minister to examine the issues around bankruptcy tourism and the thresholds at which people could qualify for various reliefs.

We very much welcome both the thoughtful approach of the Joint Oireachtas Committee to this important piece of law reform, and also that many of FLAC’s particular concerns have been addressed in the Committee’s report. FLAC had raised the lack of any appeal mechanism, the need to license those administering the scheme and the necessity of ensuring that the crucial role played by MABS over many years is properly factored into any scheme of debt settlement.

We had also underlined the importance of securing a minimum protected income for those who enter into debt relief schemes, which was also flagged by the Committee. Above all, FLAC has been adamant that it is futile to separate out people’s mortgage debt from their other debts. Recent statistics showing a continued rise in serious mortgage arrears make the need for proper legislation all the more acute, given the thousands of households seeking an effective course of action where currently none is possible.

The Justice Committee’s clear recommendation that the government must take a holistic approach to debt is a significant political endorsement by the representatives of the Irish people for an inclusive, comprehensive approach to the problem.  Clearly much more work has to be done to tease out the details, and to this end FLAC has submitted a longer, more detailed piece of analysis on the draft Bill. However it seems at this stage that the Committee’s report has been able to identify common areas of concern drawn from a wide variety of interests. It is to be hoped that the Minister will be able to take this on board and legislate well in the public interest.

Noeline Blackwell is Director General of FLAC (Free Legal Advice Centres), an independent non-governmental organisation that campaigns for equal access to justice. FLAC has worked for a number of years on the reform of the law of personal debt, which is documented at flac.ie.

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About the author:

Noeline Blackwell  / Dublin Rape Crisis Centre

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