YESTERDAY THE LONG awaited launch took place of both the insolvency service of Ireland and the expenditure guidelines, which will act as a minimum level of allowable expenditure when a person is trying to do a deal with creditors on their debt.
The expenditure guidelines are, as some would say, a start. They are a minimum, as some people who have been dealing with debt for a number of years have been living on less.
However, there are some issues with the expenditure guidelines. No where does it allow for a second car. No where does it allow for someone being promoted and needing maybe new clothes for work or someone getting a job and needing a car or any level of up-skilling. The government’s plan on returning people to work will not be helped by this. For a modern world you’re allowed under €5 per month for, not broadband, but a dongle, yes a dongle. Good luck to those in the patchy parts of Ireland.
While people will debate what others can live off, the main issues will slip by. This process has no independent oversight , no guaranteed access to a professional insolvency practitioner. The Personal Insolvency Practitioners (PIP) will not be given prescriptive rules around charges, which in my view will create a big challenge for people who have little cash flow and will be attractive as a client to a PIP. In a normal commercial world it’s fine to charge in various manners for services, when it involves the issue of over indebtedness and vulnerable people there needs to be a competent public system that ensures everyone has access and is protected.
If you’re accused of any crime and can’t afford representation or advice you’re given free legal help. With this new system it’s structured where the low hanging fruit will be selected by PIP. Those who have cash available and can pay up front, those with complex cases involving the sale of investment properties or cash available through rent also become attractive, someone with a complex case and might be able to release money along the line becomes less attractive, and the person who is really in trouble and has no funds what so ever will be left on the insolvency scrap heap. This is simply unacceptable, we have pumped billions into banks and the least those affected by debt deserve in their attempt to resolve it is competent help to do so. There is an urgency need for another PIP, a public insolvency practitioner.
The insolvency system, about to begin, has what can only be described as remarkable and despicable aspect to it . There appears to be a few types of register. The first one is that those who apply and are granted the 70 day protection from creditors appear on a register and also if you get an insolvency arrangement that your name, address, year of birth and date of agreement are on a public web site for all to see. In my reading of the bill there is no provision or way to remove someone from this register, ever. This is not acceptable. This is a step too far and should be immediately changed.
Five years ago when this mess unfolded, little has been done to support the Money Advice and Budgeting Service (MABS). MABS is a tried, tested and trusted service whom debtors and creditors have trusted for 21 years. Yes, they would have required up-skilling and training but why did they not get it? Who benefits from such a lack of investment? Only the creditor . MABS is inside the Citizens information Board which is inside the Department of Social Protection. The irony is that those who needs protection won’t be able to get it within the insolvency service unless they have money. MABS should have a board of its own with a clear direction and clear policies that reflect the changed world and clients. MABS has the expertise, experience and trust – three cornerstones of any organisation aiming to help consumers who are seriously over indebted.
Some will try and restructure their debts out side the insolvency service and these expenditure guidelines will allow for a floor regarding expenditure, which will help in those negotiations.
I fear that banks will use the targets recently set by the Central Bank to try and offer whole sale split mortgages in trying to appear to achieve their percentage restructuring requirements ,thus securing the major debt and prevent any actual write down that might come from a personal insolvency arrangement. By doing this most banks, as is their current policy, will require the debtor not to pay any unsecured creditor. This would then leave the person an unattractive client for a professional insolvency practitioner.
I want nothing more than this system to work, believe me. However the creditors are in control, it’s their party now and their in action over the past five years gives me little comfort.
David Hall was one of the co-founders of New Beginning in 2010. In July 2012, David and other concerned citizens established the Irish Mortgage Holders Organisation (IMHO) to help consumers tackle the increasing burden of personal debt. In addition to IMHO, David owns and runs Lifeline Ambulance Service. David also founded the Make-A-Wish Foundation in 1992. To read more articles by David Hall here>
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