NEW LEGISLATION to reform personal debt processes will have to be introduced next year to comply with the Government’s agreement with the International Monetary Fund and the European Central Bank, the Law Reform Commission conference was told yesterday.
The memorandum of understanding between the Government, the International Monetary Fund and the European Central Bank which underpinned the €85 billion bailout given to Ireland included a provision that laws on personal debt be reformed,including introducing non-judicial debt settlement.
The new legislation must be introduced by the first quarter of 2012, Commissioner Patricia Rickard-Clarke said. She was speaking at the commission’s annual conference in Dublin Castle where the organisation’s final report on reforming law on personal debt was launched by Mr Justice Brian McGovern.
The judge said many cases he dealt with in the High Court would have been better dealt with through mediation.
Ms Rickard-Clarke told delegates the commission proposed the abolition of imprisonment for people who cannot pay debt, with those who can pay but refuse to obey a court order telling them to do so being sentenced instead to community service. A new body, the debt enforcement office, should be set up to oversee new non-judicial debt settlement arrangements, she said.
People who took part in the new arrangements would discharge their debt over five years. For those who could not repay any debt, the office would make a once-off debt relief order and unless their circumstances changed dramatically their debt would be deemed discharged.
Mabs, the money advice and budgeting service, would have a role in assisting debtors.
Ms Rickard-Clarke also said for large and complex debts, court bankruptcy would still be used. But current legislation would be updated and instead of taking 12 years to be discharged the debts would be automatically discharged in three, with conditions.
The proposed changes would mean debts owed to the Revenue Commissioners would no longer be given priority.
Paul Joyce, senior policy researcher with Flac, the free legal advice centres, welcomed the commission’s report. He suggested creditors should pay a levy to fund Mabs, which was coming under increasing pressure. He also said loans negligently made in the past should carry consequences for the lender.
Michael Culloty, Mabs social policy officer, said it saw 40,000 people so far in 2010.
