Insolvency service is huge step in economic recovery
Bad debts are a collective woe that riddles our fragile commerce but we can now tackle such debts head on
Many commentators have already doomed the insolvency service to failure because of the perceived power of the banks. What they fail to recognise is that the Personal Insolvency Act is a “game-changer”. Where previously banks may have been slow to respond to the financial troubles of debtors, safe in the knowledge that borrowers had no other viable options, they now need to be aware that an insolvent person can consult an ISI-authorised personal insolvency practitioner.
A solution can be formulated where the bank may have only limited control over the shaping of the outcome. And if a bank opts to vote down a reasonable proposal, the likely next step for the debtor is to declare bankruptcy. Previously, with a term of 12 years, a suggestion of bankruptcy would have been perceived as an idle threat. Now, with an automatic discharge of three years, this is a very real option for people in debt.
These new debt-relief solutions are not an appeal to anyone’s better nature. Commercial realities should see sensible proposals accepted. Success rates on individual voluntary arrangements in the UK, based on creditors voting on arrangements similar to those being introduced here, are in excess of 90 per cent.
The Personal Insolvency Act will not create bad debts for creditors – the bad debts already exist. But it will tackle them head on. I believe these new solutions will be effective. I take confidence from the international precedents which show that solutions similar in many respects to our own have proven highly successful over many years.
I firmly believe these new debt solutions are not just good for debtors but are also in the interest of creditors by offering an efficient and fair means to tackle what is a very large problem for everyone concerned. Ultimately, it is in all of our interests to return an insolvent debtor to solvency, to ensure their wellbeing and give them the second chance that they deserve.
Lorcan O’Connor is director of the Insolvency Service of Ireland. Further details of the new debt solutions are available from the ISI’s website (isi.gov.ie) and information line 076-1064200)