While the incoming Government fulminates over the scale of the national debt, a volcano of personal distressed debt is boiling under the crust . Ireland and Europe may ultimately find a resolution to the crazy burden being put on the State ie our taxpayers, public services and social protection dependents - but what of those among us crippled with debt?

• Over 110,000 people are in arrears for electricity and gas. That’s just a sliver.
• Nearly 6%, that’s over 45,000 mortgages, are in arrears by three months or longer
• Another 40,000 among the 790,000 mortgages in existence, have already been restructured.
• The current mountain of personal debt, term loans, credit cards and overdrafts in distress isn’t known - but its mega.

Meanwhile those struggling with distressed debt, despite the stay put on house repossessions, continue to face an unreformed and Dickensian debt recovery process that’s reliant on the court services applying rules, some of which date back to The Sheriffs Act 1215!

Even Ireland’s most recent legislation, the Bankruptcy Act 1988 which sentences defaulters to 12 years exclusion from society and liability for all the enormous costs of bankruptcy, is inherently flawed and cannot function to meet the scale of the burst. Little of substance was done by the last Government to deal with this crisis despite the obvious fact that it would accompany a trebling of joblessness.

There’s No Excuse- The Hard Thinking Has Been Done by the LRC

The incoming Government needs to declare a State of Emergency and rapidly introduce all of the recommendations of the Law Reform Commission’s comprehensive report on personal debt management and enforcement. These changes, ideally should dovetail with the IMF requirement that Ireland’s bankruptcy laws are overhauled by March 2012. That means;

• A fit-for-purpose Debt Enforcement Office that oversees a panel of Personal Solvency Trustees who work with both debtor and creditors in agreed workouts over 5 years after which people are allowed a fresh start.
• Bypass the costly court system entirely, freeing it up to deal with its many other pressing demands on its time
• Allow  for a Debt relief Order where debtors who genuinely have no income and no assets - so-called NINAs, are given a clean slate.
• Overhaul bankruptcy laws to allow for full discharge from bankruptcy after three years with provisions similar to restriction and disqualification from credit for several years thereafter – where deserved.
• Licence and closely regulate debt management and debt collection agents to ensure fair treatment and procedures.
• Tackle default on distressed negative equity mortgages head on by not giving banks any priority over other unsecured creditors. That means treating the shortfall between the sale price and the mortgage on equal terms with all other creditors in debt resolution schemes administered by Personal Insolvency Trustees. Revenue debts get the same treatment. Clear-headed calculations are needed to estimate the impact on further bank recapitalisation down the road.

The Benefits are Clear

The benefits are indisputable and, if not prioritised by the new Government, should be vigorously pursued by the opposition parties of the Left, the ULA and Sinn Fein, because;

• Overwhelmed debtors are provided relief as soon as possible to restore their participation in society and the economy
• Risk taking small business owners, especially the self employed, know there is a safety net of a non-Court debt resolution process when things go horribly wrong.
• Those best able to carry the burden do so, rebalancing the power between highly resourced credit institutions and marginalised debtors.
• The burden on social protection costs is reduced.
• Irish society recognises that it owes a duty to the genuine victims of the burst.
• Rebalance the opposing needs of creditors and debtors in a dignified system that has real teeth where either side deals unfairly.
• The LRC has provided a balanced and detailed template for reform that deals squarely with all the worries of the let-them-burn brigade.
• Nobody ever again goes to jail for not paying debts.