A number of the leading publications in Ireland from time to time continue to run stories highlighting the fact that Irish debtors seem to be continuing to go to another jurisdiction to declare bankruptcy, most notably Northern Ireland, England or Wales. Some of the articles are written in such a way that the author appears to be in some sort of shock that with the new insolvency legislation now about to be launched in Ireland why would people still want to do this. In fact I have listened to so called financial experts in the Irish press and on television and radio over the past few months, and it seems that they too seem to misunderstand the new legislation.
Let me be very clear - the new insolvency legislation will do little to stem the race across the Irish sea or into Northern Ireland to resolve the personal debt crisis facing the country. The new law which has been drafted to air on the side of the banks is designed to punish people, and if you do this, well - would it not be reasonable to assume that many will decide to put the two fingers up at it and take measures into their own hands - I think so.
It has been leaked in the past few weeks that the banks themselves had some influence in the drafting of this legislation, and to be frank having been working in this industry for quite some time now, I am not surprised to hear this and when you see the papers, its clear they likely had some influence over the documentation. The bottom line is though, its not going to work. If you are seriously expecting people to live on beans and toast sorry just beans for six years, well then I am sorry it wont work. If you give the bank a veto on the arrangement, well its unlikely people will fall for that one either. The facts are that the new bankruptcy law will bar you from being a director in a company for 3 years and ....if you have any chance of making a few euros after that there maybe a five year claw back.
Take the scenario whereby you have a pretty sharp young entrepreneur who has 6 buy to let properties and a good SME business with lots of potential. He is studying the new legislation with the help of an advisor trying to work out what his best options would be, to move on with his life. If he stays in Ireland, well there is a good chance it may take him 8/9 years to deal with his debt. If he decides to go to NI or England - 12 months. Question? Where is that guy going to want to resolve his debt problem? Well the droves of people we are seeing in GDP Partnership in our Dublin office are telling us that they will be moving to England or up to NI for a period as they just are not prepared to put their life on hold for up to 10 years in the Republic of Ireland - and to be fair who would argue with them. This has to be a huge problem for the country as a whole as the one opportunity the government had recently of devising a bill that would work for everyone, is actually making people take the law into their own hands and go to another jurisdiction - a sensational failure!
A few months ago a BBC journalist described Ireland as Europe's only remaining open air debtors prison - well that's one way to look at it and I would certainly agree with this to a large extent. The majority of the banks are obsessed with putting borrowers through the mangle several times, dragging their heels regarding the personal debt issues and SME's are going through a slow death as they are swamped with bad debt that will never be repaid. We see all sorts of confusing reports recently of green shoots for Ireland and reduction in unemployment only last week - what the figures didn't say was that unemployment maybe fell slightly but it was as a result of part time jobs increasing. The trend for people on part time contracts is that they don't spend, hence no real benefit for the economy - so the wheel goes round and round.
Tourism bankruptcy will continue to be a very real choice for people living in the Republic of Ireland and to be quite honest there is very little anyone can do about it. Its unfortunate that the government in their wisdom didn't duplicate (or design something that resembles it) the insolvency legislation that works quite well in the UK and NI, as this would have sent out certainly a more positive message to the borrowers themselves.
Most notably I read with interest at the weekend the USA is now starting to pull back out of recession and jobs are increasing and even the housing market is picking up. How can this be? The reason is that the government took strong decisions three years ago and had the gumption to stick to their resolve and now are getting the rewards. Oh yes and the USA banks deal very aggressively with bad debt writing it down and starting again - more or less!! Go to the opposite end of the spectrum and you will see the Irish government model, which is floating in thin air, economy awash with debt, it's airports full of young talented professionals with one way tickets to far away fields, and those left behind in the country emotionally if not financially bankrupt and struggling to see the wood from the trees. As the band D-REAM hit record suggests.... Things can only get better!
Autrhor Conor Devine MRICS : Principle of GDP Partnership
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