Small businesses or individuals who struggle to pay off “modest” debts should not be brought to court, under new rules proposed by the Law Reform Commission.
And bankruptcy laws should be overhauled to allow those unable to pay back serious debt to be discharged within three years, instead of the current 12 years.
Small businesses or individuals who struggle to pay off “modest” debts should not be brought to court or put in jail, under new rules proposed by the Law Reform Commission.
And bankruptcy laws should be overhauled to allow those unable to pay back serious debt to be discharged within three years, instead of the current 12 years.
In a long-awaited report on personal debt, the Commission makes 200 recommendations aimed at bringing Ireland into line with international practice of dealing with small debts in a non-judicial way.
The Law Reform Commission recommends the ending of imprisonment for debt entirely even for those who can pay. Instead they should be forced to do community service.
If the recommendations make the statute books, it will mean an end to the practice of jailing people for offences such as non-payment of penalities relating to motor tax, TV licences or parking fines.
It recommends that “those who can pay and wilfully refuse to obey a court order should still be prosecuted but that the appropriate sanction is a community service order”
It also calls for the regulation of debt collection agencies and for the creation of a debt enforcement office to oversee a new “non-judicial debt settlement arrangements”.
This process, it says “will probably be of most use to individuals who have relatively modest debt levels and assets (including small business-related debts)”.
On personal insolvency or bankruptcy, the Commission makes three main proposals:
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That there is automatic discharge from bankruptcy after three years (subject to a bankrupt’s estate available for paying off of debts)
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That the court can still order the bankrupt to make repayments for up to five years after being declared bankrupt
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That the minimum debt required to bring a creditor’s bankruptcy petition is raised from €1,900 to €50,000.
- That there is a significant reduction in the number of priority debts including tax to paid off in bankruptcy.
A debt enforcement office would license personal insolvency trustees who would negotiate a debt settlement between creditors and debtors.
The Law Reform Commission recognised the personal needs of those in debt and said any repayment settlement should leave sufficient income (whether welfare or otherwise) to allow a person or his and her family to have a “minimum standard of living”.
The report could herald the end of some of the most severe bankruptcy laws in the world.
Both in the US and the UK there are long-established non-judicial processes for dealing with debt. In the UK bankrupts are discharged from their obligations to pay back debt within 12 months, enabling those involved in failed businesses to return to trade within a year.
