Thankfully, the troika will continue to review Ireland’s compliance with the Memorandum of Understanding, even after the last tranche of funding is handed over at the end of this year. Because, without the Troika, we would not be getting any reform of our draconian bankruptcy arrangements; it was the Troika which has frog-marched us into providing an adequate mechanism to allow seriously insolvent individuals to deal with their debts and be given a new start where they could contribute to the economy. This Government has in fact missed targets for the implementation of reforms, and even today, we have a Personal Insolvency Act which was signed into law by President Higgins on St Stephen’s Day in 2012 but it has still not been commenced. So, the three-year bankruptcy, the debt relief notices, the controversial personal insolvency scheme are all pie-in-the-sky at present though it is hoped that Minister for Justice and Equality, Alan Shatter will commence the Act shortly.
Meanwhile, on Friday in the US state of Connecticut, an Irishman, developer Sean Dunne with debts of over €350m, with a cheque for USD 306 (€239) initiated a process that will last 120-150 days and may see Sean emerge financially reborn by July 2013. Sean has engaged an attorney, or solicitor as we might say, but he didn’t have to – the fee pays for the State to provide a bankruptcy trustee.
Sean has been given a platform by the Sunday Independent today to set out his side of the story. In it, he says “I consider my debt to the Irish State to be cleared” after a lifetime of developing property in Ireland during which he employed hundreds and paid millions in tax and levies.
Many indebted Irish people will today contrast their options with Sean’s story.
How many Irish people would dearly love to be able to hand over a payment of €239 to the courts and say, “there, now you sort out my finances and by July 2013, I start with a clean sheet” Yes, it may require you to hand over your home in some instances, it may require you to hand over any savings and other valuables, but by August 2013, you would be financially reborn. And if you wanted to take the moral high ground, you could point out how much income tax and VAT and road tolls and suchlike that you had paid in your lifetime, and like Sean Dunne high-and-mightily announce “I consider my debt to the Irish State to be cleared”
So, how will Minister Shatter justify the half-hearted reforms in the new Personal Insolvency Act to the domestic audience? How can Minister Shatter defend his reforms if people with a few hundred thousands of euros debts will be put through the mill for three years and Sean Dunne, owing hundreds of millions can emerge clean as a whistle in four months?
Here is a list of NAMA developers who have been made bankrupt outside of Ireland (it may not be comprehensive)
I see your problem here!
You think the Personal Insolvency Act is designed for the people.
You need to re-adjust your world view!
Think how it works for the banks – and then it all makes sense.
At the moment, the banks have 30,000 people in arrears – about a third of who are so far underwater that if they did any financial modelling, they would realise immediately the sensible thing to do would be to declare bankruptcy. A bill that allowed them to do this easily, would shift the burden from them on to the banks.
If the average they owed, with principal and interest arrears, is €200,000 – then the banks would have a €20 Billion hole overnight.
As it stands by introducing a bill so bank-friendly, delaying it’s introduction as long as possible and allowing the banks a veto, then the banks can drip-feed these “losses” (for “losses” read “people’s lives”) over the next 10 years.
So we may have a 1,000 people being bankrupted a year from now on – but that suits the banks nicely.
They know they have 10,000 people who will never be able to pay their debts.
The worst part is that these unfortunate people don’t know it.
The hopeless cases have enough hope to think they may be able to manage – but they must not have too much despair to see 12 months in the UK as freedom.
So the government, having been told by the banks that the €20 Billion hole will have to be filled immediately by the government or can be massaged through higher banking costs, loss provisions made against tax and higher interest rates over the next ten-to-twenty years, have introduced the Personal Insolvency Act to facilitate the banks (and by extension the current government).
So, if you think of the PIA, as the FG/Labour government throwing the people under the bus to save the banks – just like the FF/Green government did – then the act makes a lot more sense!
My letter in today’s SBP relates to this and poses a basic question for banks and government:
“Reports that AIB is planning to sell a €200 million loan portfolio beg the question as to why taxpayer- and foreign-owned banks are selling huge blocks of loans at discounts as high as 70 per cent and crystallising losses amounting to billions while resisting any similar broad-based write downs of seriously distressed home mortgages.
These discounts are additional to the €40 billion taxpayer-funded losses realised when developer loans transferred at a huge discount to Nama. Surely, to be consistent and fair, the covered banks should be required to offer write downs to all very distressed mortgage holders especially given that they have already been fully funded by taxpayers to do so?”