Such is the perilous state of the Irish economy that the rationale for the Croke Park pact between the Irish trade unions, the government and public sector employers has already been exposed as a fraud.

Croke Park set out terms in which the unions agreed to a four-year strike ban, huge productivity and flexibility demands, job losses on a “voluntary” basis in return for a cap on pay cuts for public service workers. Their claim that this would somehow prevent an economic meltdown lies in tatters. In reality the deal exposed the trade unions as a tool of the financial aristocracy for imposing the costs of the banking crisis onto the working class and opens the way for yet more savage attacks.

That is precisely why the provision to avoid further pay cuts was qualified by being “subject to no currently unforeseen budgetary deterioration” in Irish state finances.

Comments in the Irish Times from Morgan Kelly, an economics professor with University College Dublin, make clear that Ireland’s budgetary situation is, in fact, set to decay rapidly. According Kelly, who is credited with having predicted the collapse of the Irish housing bubble, “It is no longer a question of whether Ireland will go bust, but when”.

Kelly states that the bank bailout imposed on the Irish public purse by the Fianna Fail government and the semi-criminal Irish banking fraternity from whom it is inseparable is utterly ruinous. In the United States, some $700 billion was handed over the banks to buy impaired assets. Some $150 billion is likely not to be repaid.

Ireland has committed itself to at least €70 billion, half the national income, or 10 times the per capita amount committed by the United States.

Of this vast sum, Kelly reckons that of €100 billion property development loans taken on by the government via the “bad bank” National Asset Management Agency, at least 33 percent will never be repaid. The same is true of 20 percent of €35 billion business loans and 5 percent of €160 billion in mortgages and personal lending. This amounts to nearly €50 billion, or 30 percent of GDP. Kelly believes that €70 billion is a more likely figure. If this is added to the national debt, Ireland will by 2012 have a total debt of 115 percent of GDP. As GDP is falling and unemployment increasing at the rate of 6,000 per month, this ratio will only increase.

At a certain point international capital markets are unlikely to continue funding Irish debt, whereupon the government will be forced to turn to the European Central Bank (ECB). In return for a rescue package, Kelly explains, the ECB will demand swingeing welfare cuts far beyond what has already been imposed.

Kelly’s analysis was echoed in the Baseline Scenario, an international economics commentary site by Peter Boone and Simon Johnson, a former chief economist at the International Monetary Fund. Ireland faces, firstly, either a sovereign debt default or the complete collapse of its banks; secondly, further devastating spending cuts; and, finally, a decision on whether continued membership of the euro is possible.

In response to the worsening situation, the major public service unions have moved even further to the right. Having initially rejected the Croke Park deal, the executive of the second largest public service union Impact changed its position May 7 and is now calling for its 65,000 members to accept the agreement.

The basis of their u-turn was a number of “clarifications” of the deal, including the so-called “get out clause” on unforeseen budgetary deterioration. Impact have agreed with the government and Labour Relations Commission that it is the “expressed intention and expectation” of the government that there will be no further pay cuts. Should, however, further pay cuts be imposed—although none are expected “on the basis of currently known facts”—the unions states that it would “cease to be bound by the terms of the draft agreement”.

This minor alteration of the agreement’s text, along with a minor concession on pension rights was presented by Impact’s general secretary designate, Shay Cody, as providing “trust in the Government’s intentions”. Cody also claimed that the compulsory redeployments, which could see workers being transferred from one department to another within a 45-kilometre radius, would be operated “in a reasonable manner”.

Impact’s change of position lines the union alongside the Services, Industrial, Professional and Technical Union (SIPTU), the largest public sector union. Voting by some 300,000 public sector workers is currently taking place on the agreement. Union officials will then take the result of their respective union ballots to the Irish Congress of Trade Unions (ICTU) public service committee, where votes are weighted according to the number of public service members in the particular union.

Such is the importance that Irish business attaches to the agreement that SIPTU leader Jack O’Connor was recently awarded a “Business Person of the Month” award from the influential Business and Finance magazine. Previous winners of the award include Mathew Elderfield, Ireland’s newly appointed financial regulator; Brian Lenihan, the current minister of finance; and Aidan Heavey, the founder and CEO of Tullow Oil.

A number of officials for smaller unions have opposed the agreement and been somewhat more truthful about its impact, as a means of adapting themselves to the widespread opposition amongst their members. Dave Hughes, deputy general secretary of the Irish Nurses and Midwives Organisation (INMO) complained of a “tyranny of consensus”. He pointed out that the Croke Park terms were “highly conditional promises on return for absolute compliance with government policy.... It requires the silencing of those who dare to defend their service, job or community”.

Hughes noted that, on top of 2,000 nursing positions lost over the last two years, 6,000 more were imperilled, along with 3,500 acute beds. He made clear, however, that the INMO was certainly not going to lead any determined campaign against the government. “Voting ‘no’ will not lead to nurses and midwives going on strike”, he said, which would require a “new mandate”.

The INMO’s annual conference advanced an alternate plan to implement its own programme of health costs savings, involving more rapid patient turn around, greater use of minor injury units and reduced use of specialist services.

Hughes’s muted criticisms provoked an angry response from other sections of the union bureaucracy.

Louise O’Reilly, SIPTU’s national nursing officer and one of the agreement’s negotiators, insisted that Croke Park gave “certainty in uncertain times”. It was the “best possible outcome”.

She made clear SIPTU’s hostility to any campaign based on mobilising the working class. “Very few spell out the reality that a massive escalation of industrial action will be the only way of stopping the Government from introducing further cuts, egged on by private vested interests”.

O’Reilly further complained, responding to bitter criticisms from SIPTU’s own members, that “It is unfair to present the ballot as some sort on referendum on the Government”.

The media has waded in behind Croke Park. Writing in the Irish Independent, Alan Ruddock ranted that public sector workers were “shielded from the dole queue, their pensions unaffected by the vagaries of the stock markets”. Of those opposing Croke Park, Ruddock complained that “they still cannot accept a deal that should never have been put before them in the first place”.

To date, the agreement has been thrown out by a number of groups of workers.

Lower paid civil servants in the Civil and Public Services Union (CPSU), which has 13,000 members, rejected the deal by two to one on a 74-percent turnout. CPSU members have previously voted 86 percent in favour of strike action against the government’s spending cuts.

Two teachers’ unions—the Association of Secondary Teachers, Ireland, with 18,000 members and the Teachers Union of Ireland, representing 14,500—rejected the deal by three to two and three to one majorities. Two thousand university lecturers in the Irish Federation of University Teachers balloted against the agreement by two to one.

Results from the largest organisations, including SIPTU and Impact are not expected until June. Even if the overall result is a resounding “No”, working people cannot defend anything within the framework of these moribund and pro-corporate organisations. New organisations of struggle are urgently necessary which take as their point of departure the independent interests of the working class in Ireland and internationally, and which oppose giving a single cent to Ireland’s criminal and parasitic oligarchy.

By

By Steve James
31 May 2010

Our attitude to debt is similar to our attitude to jay-walking. Behind the wheel, we curse the wilful irresponsibility of the pedestrian making a dash across the road. As walkers, we stare down that big car, willing the driver to give us a break.

As financial pedestrians, we’re furious at the banks being bailed out. In theory, developers will owe Nama the same money today as they did the banks yesterday. In practice, deals will be cut to howls of protest that full repayment is not forced. “Take their homes!” the proles cry in vain.

Elsewhere, applications for examinership and receivership rise as companies crack under sectoral collapse. Most are genuine, but one small businessman I know is deeply suspicious. Why is he struggling to pay suppliers while his competitors walk away to start over, unencumbered by overdrafts? It’s not fair. We just don’t like it when people don’t pay what they owe. Whatever about the economics, we have deep moral instincts about debt repayment.

Yet attention turns, slowly and reluctantly, to that other icky pile of financial excrement, the waft from which one has done one’s best to ignore – personal debt. While we want the financial SUVs to pay their dues, these over- borrowed pedestrians command our sympathy. “Save their homes!” the cry goes.

The ESRI’s David Duffy made a stab at calculating the numbers in negative equity (almost 200,000 by end 2010, he thinks), but acknowledges that tells us little. Negative equity is an indicator for, but doesn’t automatically lead to, mortgage default. That requires an “income event” – a job loss.

The CSO says 77,500 are in arrears, but this includes those behind on the rent too. The Free Legal Aid Centre suggests that 30,000 homeowners might default. Each one will be a personal catastrophe and the numbers are high enough to demand that we do something.

Apparently Eamon Ryan is championing the issue at Cabinet.

My auctioneering brother Edward says short selling is the only way. That means the house in negative equity is sold and the bank agrees to accept the sale price as a final settlement, even though it’s lower than the outstanding mortgage balance. This is common in America where most mortgages, especially in states such as California, are “non-recourse”. You last heard that phrase used abusively in relation to Anglo Irish. It means the bank can’t come after you personally for the shortfall.

They should take a hit because while you were unwise to borrow too much, they were worse to lend to you on crazy income multiplier ratios. Karl Deeter from Irish Mortgage Brokers says no plan will work unless the banks are persuaded to buy in, and I’d say they won’t like the sound of Ed’s idea. Even if they did, there’s still significant unsecured debt to be tackled.

The banks will prefer other suggestions, such as payment moratoriums to equity swaps, which really mean the borrower has to pay back the full amount, but under individual voluntary agreements that allow for gradual repayments that protect the family home.

These proposals aren’t enough. Demanding that borrowers pay back every last cent, but giving them a lifetime to do so, will add to our problems, not cure them. How does weighing down a generation with debt help the economy? We need to get things moving again and anchoring tens of thousands to their past mistakes will fatally prevent this.

The right thing to do for the economy, if not for the moral imperative to pay what we owe, is to let people declare bankruptcy. Pay what you can and do a phoenix. When banks, developers and businesses do it we spit bile, but everyone benefits in the long run.

According to the Atlantic magazine, last year one in 300 Americans declared themselves personally bankrupt. In the UK, there were 150,000 personal insolvencies, including 67,000 bankruptcies. In Ireland there were 15. In the UK, people can file for bankruptcy online. In Ireland it involves a High Court proceeding. In the US and the UK the “discharge” period is one year. Here it’s 12 years. We have one of the most draconian systems for personal insolvency in the world, and it’s going to strangle our recovery. We have to change.

Credit institutions will preach the “can’t or won’t pay?” sermon, but what’s good for the goose is good for the gander. We need to make it easy to fail. Some say that will encourage consumers to behave badly. It might encourage banks to lend more wisely.

As America cheerfully accepts, it definitely encourages risk-taking and that’s a currency we all depend upon. Doing penance for our financial sins might come more naturally to our Catholic instincts, but turning the other cheek might save our economic souls.

We have one of the most draconian systems for personal insolvency and it’s set to strangle our recovery, writes SARAH CAREY 

OUR ATTITUDE to debt is similar to our attitude to jay-walking. Behind the wheel, we curse the wilful irresponsibility of the pedestrian making a dash across the road. As walkers, we stare down that big car, willing the driver to give us a break.

As financial pedestrians, we’re furious at the banks being bailed out. In theory, developers will owe Nama the same money today as they did the banks yesterday. In practice, deals will be cut to howls of protest that full repayment is not forced. “Take their homes!” the proles cry in vain.

Elsewhere, applications for examinership and receivership rise as companies crack under sectoral collapse. Most are genuine, but one small businessman I know is deeply suspicious. Why is he struggling to pay suppliers while his competitors walk away to start over, unencumbered by overdrafts? It’s not fair. We just don’t like it when people don’t pay what they owe. Whatever about the economics, we have deep moral instincts about debt repayment.

Yet attention turns, slowly and reluctantly, to that other icky pile of financial excrement, the waft from which one has done one’s best to ignore – personal debt. While we want the financial SUVs to pay their dues, these over- borrowed pedestrians command our sympathy. “Save their homes!” the cry goes.

The ESRI’s David Duffy made a stab at calculating the numbers in negative equity (almost 200,000 by end 2010, he thinks), but acknowledges that tells us little. Negative equity is an indicator for, but doesn’t automatically lead to, mortgage default. That requires an “income event” – a job loss.

The CSO says 77,500 are in arrears, but this includes those behind on the rent too. The Free Legal Aid Centre suggests that 30,000 homeowners might default. Each one will be a personal catastrophe and the numbers are high enough to demand that we do something.

Apparently Eamon Ryan is championing the issue at Cabinet.

My auctioneering brother Edward says short selling is the only way. That means the house in negative equity is sold and the bank agrees to accept the sale price as a final settlement, even though it’s lower than the outstanding mortgage balance. This is common in America where most mortgages, especially in states such as California, are “non-recourse”. You last heard that phrase used abusively in relation to Anglo Irish. It means the bank can’t come after you personally for the shortfall.

They should take a hit because while you were unwise to borrow too much, they were worse to lend to you on crazy income multiplier ratios. Karl Deeter from Irish Mortgage Brokers says no plan will work unless the banks are persuaded to buy in, and I’d say they won’t like the sound of Ed’s idea. Even if they did, there’s still significant unsecured debt to be tackled.

The banks will prefer other suggestions, such as payment moratoriums to equity swaps, which really mean the borrower has to pay back the full amount, but under individual voluntary agreements that allow for gradual repayments that protect the family home.

These proposals aren’t enough. Demanding that borrowers pay back every last cent, but giving them a lifetime to do so, will add to our problems, not cure them. How does weighing down a generation with debt help the economy? We need to get things moving again and anchoring tens of thousands to their past mistakes will fatally prevent this.

The right thing to do for the economy, if not for the moral imperative to pay what we owe, is to let people declare bankruptcy. Pay what you can and do a phoenix. When banks, developers and businesses do it we spit bile, but everyone benefits in the long run.

According to the Atlantic magazine, last year one in 300 Americans declared themselves personally bankrupt. In the UK, there were 150,000 personal insolvencies, including 67,000 bankruptcies. In Ireland there were 15. In the UK, people can file for bankruptcy online. In Ireland it involves a High Court proceeding. In the US and the UK the “discharge” period is one year. Here it’s 12 years. We have one of the most draconian systems for personal insolvency in the world, and it’s going to strangle our recovery. We have to change.

Credit institutions will preach the “can’t or won’t pay?” sermon, but what’s good for the goose is good for the gander. We need to make it easy to fail. Some say that will encourage consumers to behave badly. It might encourage banks to lend more wisely.

We have one of the most draconian systems for personal insolvency and it’s set to strangle our recovery, writes SARAH CAREY 

OUR ATTITUDE to debt is similar to our attitude to jay-walking. Behind the wheel, we curse the wilful irresponsibility of the pedestrian making a dash across the road. As walkers, we stare down that big car, willing the driver to give us a break.

As financial pedestrians, we’re furious at the banks being bailed out. In theory, developers will owe Nama the same money today as they did the banks yesterday. In practice, deals will be cut to howls of protest that full repayment is not forced. “Take their homes!” the proles cry in vain.

Elsewhere, applications for examinership and receivership rise as companies crack under sectoral collapse. Most are genuine, but one small businessman I know is deeply suspicious. Why is he struggling to pay suppliers while his competitors walk away to start over, unencumbered by overdrafts? It’s not fair. We just don’t like it when people don’t pay what they owe. Whatever about the economics, we have deep moral instincts about debt repayment.

Yet attention turns, slowly and reluctantly, to that other icky pile of financial excrement, the waft from which one has done one’s best to ignore – personal debt. While we want the financial SUVs to pay their dues, these over- borrowed pedestrians command our sympathy. “Save their homes!” the cry goes.

The ESRI’s David Duffy made a stab at calculating the numbers in negative equity (almost 200,000 by end 2010, he thinks), but acknowledges that tells us little. Negative equity is an indicator for, but doesn’t automatically lead to, mortgage default. That requires an “income event” – a job loss.

The CSO says 77,500 are in arrears, but this includes those behind on the rent too. The Free Legal Aid Centre suggests that 30,000 homeowners might default. Each one will be a personal catastrophe and the numbers are high enough to demand that we do something.

Apparently Eamon Ryan is championing the issue at Cabinet.

My auctioneering brother Edward says short selling is the only way. That means the house in negative equity is sold and the bank agrees to accept the sale price as a final settlement, even though it’s lower than the outstanding mortgage balance. This is common in America where most mortgages, especially in states such as California, are “non-recourse”. You last heard that phrase used abusively in relation to Anglo Irish. It means the bank can’t come after you personally for the shortfall.

They should take a hit because while you were unwise to borrow too much, they were worse to lend to you on crazy income multiplier ratios. Karl Deeter from Irish Mortgage Brokers says no plan will work unless the banks are persuaded to buy in, and I’d say they won’t like the sound of Ed’s idea. Even if they did, there’s still significant unsecured debt to be tackled.

The banks will prefer other suggestions, such as payment moratoriums to equity swaps, which really mean the borrower has to pay back the full amount, but under individual voluntary agreements that allow for gradual repayments that protect the family home.

These proposals aren’t enough. Demanding that borrowers pay back every last cent, but giving them a lifetime to do so, will add to our problems, not cure them. How does weighing down a generation with debt help the economy? We need to get things moving again and anchoring tens of thousands to their past mistakes will fatally prevent this.

The right thing to do for the economy, if not for the moral imperative to pay what we owe, is to let people declare bankruptcy. Pay what you can and do a phoenix. When banks, developers and businesses do it we spit bile, but everyone benefits in the long run.

According to the Atlantic magazine, last year one in 300 Americans declared themselves personally bankrupt. In the UK, there were 150,000 personal insolvencies, including 67,000 bankruptcies. In Ireland there were 15. In the UK, people can file for bankruptcy online. In Ireland it involves a High Court proceeding. In the US and the UK the “discharge” period is one year. Here it’s 12 years. We have one of the most draconian systems for personal insolvency in the world, and it’s going to strangle our recovery. We have to change.

Credit institutions will preach the “can’t or won’t pay?” sermon, but what’s good for the goose is good for the gander. We need to make it easy to fail. Some say that will encourage consumers to behave badly. It might encourage banks to lend more wisely.

We have one of the most draconian systems for personal insolvency and it’s set to strangle our recovery. SARAH CAREY of the Irish Times.

The result is that Ireland is out of sync with Europe, as we don’t have a modern consumer insolvency system. The only insolvency option is the little-used Bankruptcy Act. Although overhauled in 1988, the fundamental principles behind our bankruptcy system have not been updated since puritanical Victorian times. As a result, personal bankruptcy in Ireland remains punitive in nature, taking at least 12 years to discharge compared to 12 months in the UK and between three and five years in other European countries, where the focus is on rehabilitation.

“The penalties for being adjudicated a bankrupt are not of this time,” says Barry Lyons of Lyons Kenny Solicitors. “The 12-year term for bankruptcy is longer than many jail terms handed down for manslaughter.”

It is also a blunt instrument, in that it fails to distinguish between debtors who can’t pay and those who won’t pay.

Not surprisingly, given the shortcomings of the system, there were just four bankruptcies in Ireland in 2007, rising to eight last year. This compares to more than 100,000 personal insolvencies – between formal bankruptcies and individual voluntary arrangements (IVAs) – in the UK in 2008.

Some voluntary debt settlement initiatives have been set up outside the legal system, such as the operational protocol agreed earlier this year between the Irish Banking Federation (IBF) and the Money Advice and Budgeting Service (Mabs), to which 12 credit institutions signed up.

However, these voluntary initiatives only offer partial solutions. Speaking at a personal insolvency briefing last week, Grant Thornton partner Michael McAteer pointed out that the IBF voluntary code on mortgage arrears did not cover non-mortgage lending. Furthermore, credit institutions that are not members of the IBF, for example subprime lenders which are responsible for the majority of home repossessions, are not included.

Speaking at a Law Reform Commission (LRC) conference on personal debt on Wednesday, LRC commissioner Patricia Rickard-Clarke said: “While the commission endorses all of this work, we believe that a voluntary arrangement is no substitute for legislation and a proper legal system.”

Many informal plans fail due to unrealistic conditions, she said, and the rights of consumers need to be put on a statutory footing.

Aside from the antiquated bankruptcy system, the imprisonment of debtors – a practice long since abandoned in most countries – is another bone of contention. According to Paul Joyce of the Free Legal Advice Centre (Flac), some 276 people were imprisoned – some of them twice – in relation to the nonpayment of civil debt court orders last year.

In response to a High Court decision earlier this year, imprisonment of debtors due to an inability to pay a debt has been abolished. However, imprisonment has been retained as an option for dealing with debtors who “won’t pay”, although only as a method of last resort.

The LRC is currently considering whether imprisonment can be justified at all, not just because of the “huge human cost” of this course of action, Rickard-Clarke said, but also because of the cost to society, given that the cost of imprisoning an individual amounts to roughly €2,000 a week.

She also criticised the overall debt enforcement system, describing it as “hopelessly out of touch with society”. One of the problems of the current judicial system is the lack of information available to the court concerning the debtor’s financial circumstances, making it impossible to distinguish between those debtors who are willing to pay their debts but can’t afford to do so, and those who simply refuse to pay.

Furthermore, complicated procedural rules and archaic terminology such as fieri facias, bailiwick and garnishee orders, mean that debtors are often in the dark as to how the debt enforcement system operates.

So what is to be done to improve the system? The LRC has drawn up a detailed consultation paper outlining its provisional recommendations on reforming the law on personal insolvency and debt enforcement.

Fundamentally, it advises a complete overhaul of the outdated bankruptcy system, alongside the introduction of a statutory non-judiciary debt settlement system (ie operating outside the court system). The LRC feels that the latter would be more suited to consumer debt than bankruptcy, as it would reduce the costs and stigma associated with the court system.

Although there are voluntary debt settlement systems in place, making such systems legally binding would ensure the legal rights of overindebted individuals, as creditors could be compelled to participate.

Another key tenet of the system as envisaged by the LRC would be the establishment of a centralised debt enforcement office. One major advantage of a centralised system would be the ability to monitor all enforcement proceedings brought against a single debtor by their creditors. At the moment, the court is not necessarily aware of the total indebtedness of a debtor, as there is no means of assessing all enforcement proceedings against them.

The establishment of a debt enforcement office would also address the problem of assessing a debtor’s means. This assessment would be carried out in private, rather than heard publicly in open court, which, according to Flac, deters debtors from turning up in court. “The public nature of the debt enforcement system is a major barrier to participation,” says Flac in its publication To No One’s Credit, which examines the experience of debtors in the Irish legal system.

The provisional recommendations of the LRC have been well received, both by Government and by debtor support agencies, but the question of how long it will take for the necessary reforms to be implemented has been raised in several quarters.

Joyce of Flac says a plan to deal with the financial crisis has been introduced in the form of the National Asset Management Agency (Nama), but there seems to be “no plan or even a recognition that a consumer debt crisis exists”.

“Increasingly, ordinary people are asking where the rescue plan for them is,” he says.

Grant Thornton’s McAteer warned that, although the LRC’s proposals were “excellent”, if the process of implementing legislative change followed its normal course, it could take three to five years before the system was reformed. If the political will that enabled the Nama legislation to be rushed through existed, this would be “great”, but if the normal cycle was followed it could be too late to resolve the current problems, he said.

Because of this likely timelag, he suggested that a short-term solution such as a credit management plan similar to the IVA system in the UK (whereby the debtor signs up to a formal agreement with creditors to pay off a portion of what they owe over a five-year period) to which Irish banks would voluntarily sign up might be necessary to bridge the gap.

Grant Thornton has also warned that bankruptcy legislation is “crippling” the entrepreneurial classes. McAteer explained that, as business failures increased, the number of personal insolvencies was rising. In his experience, more than 90 per cent of directors of failed companies have debts associated with the company as a result of personal guarantees. It is critical to ensure that entrepreneurial classes are not punished to the extent that they never return to business, he said. That adds to the urgency of reforming the current system.

Whether the political will exists to fast-track the necessary reforms is another matter. The new programme for Government contained commitments to reform debt enforcement. In his opening speech at the LRC conference, Minister for Justice, Equality and Law Reform Dermot Ahern provided some glimmer of hope when he stressed the need to have the personal debt system in place “fast”.

“I understand that legislation takes time. I understand also that we cannot afford unintended consequences,” he said.

He requested that the LRC consultation process be concluded “in as timely a fashion as is possible”, and encouraged the LRC to consider the early release of its finalised proposals. “We want short-, medium- and long-term proposals as soon as possible.”

He also said he would push for the implementation of the commitments in the Programme for Government.

Rickard-Clarke pointed out that there were many examples of bodies, such as the Legal Aid Board, being set up on a non-statutory basis. “There is nothing to stop the Government from putting the wheels in motion,” she said. “A lot can be done in terms of advice and non-judicial debt settlement.”

However, Joyce highlights the fact that Mabs already engages in these types of activities on a day-to-day basis. Difficulties arise if one or two creditors are unwilling to engage in this process, which “can put the whole thing into chaos”.

Until now, the need to provide solutions to the mounting problem of consumer overindebtedness has been overshadowed by the need to rescue the banks.

If Nama legislation can be drafted in six months, one imagines that the Government could fast-track the long-overdue reforms needed to drag the country’s Victorian personal debt system into the 21st century.

Consumer debt: the facts and figures
 
Household debt as a percentage of disposable income increased from 48 per cent in 1995 to approximately 176 per cent in 2009, placing Ireland fourth among developed countries in terms of debt ratio.

The number of new clients contacting the Money Advice and Budgeting Service (Mabs) rose from 14,551 in 2006 to 19,041 in 2008. The rise in total initial arrears owed by new clients rose from €92 million in 2006 to €210 million in 2008.

Mabs has received 23,000 calls to its helpline so far this year.

The total value of residential mortgages provided to Irish residents rose from approximately €34 billion in December 2001 to more than €120 billion in June 2008.

The most prevalent group affected by debt is young families from their mid-20s to mid-40s, with women appearing to be more vulnerable to debt problems than men.

The level of debt enforcement proceedings in Irish courts has risen in line with unemployment. For example, in 2007 some 1,208 debt-related High Court execution orders took place. This rose to 1,601 in 2008.

Between 2001 and 2007, about 200 people were imprisoned in connection with debt. In 2008, 276 people were imprisoned.

In 2008, just eight people became bankrupt in Ireland. This compares to 106,544 insolvencies in the UK in the same year (broken down into 67,418 informal insolvencies and 39,116 individual voluntary arrangements).

(Sources: Law Reform Commission’s consultation paper on personal debt management and debt enforcement and Flac).

According to the IMF, Bangladesh's economy has held up well, which could prove vital to one businessman and his wife who are facing having their home repossessed here.

Two weeks ago, the former restaurant owner in the south east, whose wife is ill, begged the High Court for extra time to meet demands for possession by a lender that is owed €21,000 in mortgage arrears. The Bangladeshi man lost his restaurant as a result of the credit crunch but told Master Ed Honohan he was trying to sell land in Bangladesh to avoid eviction from his apartment in Ireland.

The case, one of almost 900 home repossession actions lodged in the courts this year, was adjourned for three months to facilitate a solution. Granting mercy to the man, Master Honohan warned that the "whole system is going to break down" as debtors and creditors seek adjournments in legal proceedings.

As banks prepare to place their toxic loans into NAMA -- designed to clear up their balance sheets -- attention is now turning to ordinary creditors who have no recourse to any bailouts.

Behind the €54bn NAMA wall of mainly soured commercial and property loans lies a treacherous €1bn (and counting) wave of personal and corporate debt actions that is set to wash up in our courts.In the first nine months of this year alone, 20,000 personal credit default cases came before the courts involving debts of €395m. That's a 180pc rise in the value of debts during the same period last year.

So far, judges have acted as a compassionate outlet valve, holding back a wall of personal debt pressure by granting adjournments, imploring parties to find out-of-court solutions and deferring, where possible, execution of possession orders to allow debtors to address their problems.

But the dam of personal debt could breach unless we reform our insolvency and bankruptcy laws. In addition to the human costs of personal debt such as marital breakdown, the social cost is also being borne by the taxpayer in the form of increased social welfare payments.

American bankruptcy laws are distinguished by a commitment to the notion of a fresh start, allowing people who lose their homes to discharge their debts and start afresh.

And in Britain, debtors can avail of an arrangement that allows them to earn their way to a new beginning, through a managed process which legally freezes interest and charges.But in Ireland, there is no light at the end of the tunnel for debtors who can't pay their creditors.

On Wednesday, the Law Reform Commission will host a conference on personal debt laws, calling for the establishment of a national debt enforcement office to remove debt recovery out of the courts.

But we cannot wait for years before such laws are placed on the statute books.The same political drive that attended the saving of the banks must also be applied to citizens.

- Dearbhail McDonald

Irish Independent

ACC Bank Chases €16.2m From Business Men

This Friday a summary judgement order will be placed by ACC Bank for more than €16.2m against 2 businessmen Leo Mohan and Emmet Memery both of county Dublin, over an alleged failure to repay loans on their property.

Both Business men were transferred to the Commercial Court list this week by judge Mr Justice Peter Kelly who was told the bank, had been approached by an insolvency practitioner acting for the men who told him proposals were being prepared.

The bank held off to allow for the proposals to be made, which never turned up, leaving the bank with no option but to seek summary judgement orders.

The bank lent a €13.3m loan to both men in November 07, €9.5m of the loan was used to refinance a debt due to Allied Irish Banks for part-funding the purchase of a 4.1 hectare site at Jamestown rd, Finglas, whilst the remaining €3.8m taken for release of equity release for investment purposes.

Demands for repayment of both loans were placed on July 6th , but payment never arrived said ACC. They are seeking a summary judgment of €16,207,819 plus interest.

Property developers, financiers and prominent businessmen are seeking domicile in the United Kingdom and elsewhere in a bid to avoid Irish bankruptcy laws, according to legal sources.

The Irish Independent has learned that several high profile builders and executives have secured or are in the process of establishing residency in Britain where bankrupts can avail of a "fresh start" in less than two years compared with Ireland's cumbersome 12-year term under the 1988 Bankruptcy Act.

The spectre of relocation raised its head earlier this week when National Irish Bank informed the Commercial Court that financier Niall McFadden, whom it is suing for €6.3m, had relocated to London.

Several legal sources in London and Dublin have confirmed that they have advised on relocation or have received queries from individuals about the benefits of moving to another European country where bankruptcy procedures are perceived to be more "user friendly".

The bank, in a written submission, said it feared Mr McFadden -- who put together a €28m deal to purchase 'Buy and Sell' back in 2007 and which has subsequently been sold on -- had relocated to London for the purpose of European Insolvency Regulations and in an attempt to avail of "a perceived more debtor-friendly" bankruptcy procedure.

Loathed

The practice of forum shopping, where litigants seek domicile in another EU country to protect their assets, has been trail blazed by wealthy husbands in divorce and warring parents in contested custody battles.

Now, large borrowers indebted to banks are seeking domicile outside of Ireland in a bid to avoid our bankruptcy regime which is loathed by creditors and debtors alike.

"Ireland's bankruptcy laws serve no one," said Gavin Simons, partner and head of Corporate Restructuring and Insolvency at law firm BCM Hanby Wallace.

Mr Simons, who represented secured creditors in developer Liam Carroll's Zoe Group which last night went into official liquidation, said that Ireland's personal insolvency regime needs to be reformed.

Last week's renewed Programme for Government includes a commitment to create a new system of personal insolvency regulations that will allow for a statutory, non-court-based debt-settlement regime.

Coca-Cola Strikers Refuse 180,000 Euro Deal

Coca-Cola’s bottling business have turned down redundancy deals worth up to €180,000 each.

Some of the workers are entitled to the redundancy offer which the company claims “far exceeds current industry norms”, however, just a “handful” of the 130 workers were netitled to this amount, the average payment of €10,000 to €45,000 per worker, SIPTU said yesterday.

The workers rejected the offer worth 7 weeks per year of service, although it was far above the norm at other firms in past times that had only paid the legal minimum amount, said Coca-Cola HBC Ireland.

The company should increase the severance offer in line with previous deals, recommended the Labour Court.

If Coca-Cola accepts this proposal it would raise the value of the redundancy for the longest service to around €250,000.

500 of Cola-Colas workers marched through Dublin to the headquarters of its part-owner Coca-Cola Corporation yesterday in protest of their job losses.

Coca-Cola has accued SIPTU of jeopardising the 1,100 employees they currently have, by encouraging people to boycott Coca-Cola’s products by telling them to “think before drink”.