New insolvency law very welcome, but time will tell if it will be effective

20 December 2012

While welcoming the passage through the Oireachtas of Personal Insolvency legislation as a desperately needed development, legal rights group FLAC (Free Legal Advice Centres) today warned that the new law still contained flaws that are likely to impair its effectiveness in tackling over-indebtedness for thousands of households around Ireland.

"Having campaigned for a decade on this issue, FLAC is relieved that the government finally has updated Ireland's Dickensian legal infrastructure on insolvency. However, we are still concerned that many thousands of families who are stressed out and sick with worry over debt this Christmas may not find adequate solutions in this new law. We in FLAC feel there has been a missed opportunity to tackle some issues head on," said FLAC Director General Noeline Blackwell.

"Having been hastily debated and passed through the Oireachtas, the new law remains heavily weighted in favour of creditors. Time will tell if the new law will really allow people to work their way through their unmanageable debt," commented Ms Blackwell. "On behalf of the people contacting us in desperation every day, we sincerely hope it will bring some relief, but FLAC will continue to track the system's development and how it meets the needs of debtors in a fair and balanced way."

Senior Policy Analyst with FLAC, Paul Joyce, remarked, "The Minister for Justice says that the Personal Insolvency law should assist those with unsustainable mortgage debt to have that debt written down or rescheduled However, we would again raise the glaring context for these comments. The creditor will have ultimate veto over proposals, and despite repeated calls and many submissions from FLAc and others, the new law does not provide any appeal mechanism to that veto."

FLAC says it also has concerns about the complexity of the system and the need for people to be supported with clear and easily obtainable money and legal advice throughout the process. In addition, the organisation says there is a big gap for those who are not entirely insolvent but need extra time to repay their debt. Systems for these people are still inadequate as the new law focuses solely on people who are actually insolvent, according to FLAC.

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Editors' notes:

1. FLAC (Free Legal Advice Centres) is a human rights organisation which exists to promote equal access to justice for all. As an NGO, FLAC relies on a combination of statutory funding, contributions from the legal professions and donations from individuals and grant-making foundations to support its work. We offer basic legal information through our telephone information line and free legal advice through a network of 80 volunteer evening advice centres. FLAC also campaigns on a range of issues including personal debt, fairness in social welfare law, public interest law and civil legal aid.
2. Recent FLAC releases on personal debt law reform are available online, including comments on the government's information initiative around mortgage debt and reaction to and analysis of the ECB's Opinion on personal insolvency measures as well as Central Bank mortgage arrears statistics.
3. FLAC's most recent submission on the Personal Insolvency Bill (November 2012) is also online
4. A briefing on the background to the legislation (June 2012) is available on FLAC's website too.