Statement on Launch of Insolvency Service of Ireland
18 April 2013
FLAC (Free Legal Advice Centres) welcomes the issue of guidelines on minimum income and the regulations on Personal Insolvency Practitioners as necessary forerunners to the commencement of the Personal Insolvency Act 2012. This legislation is badly needed for those who are insolvent and need a proper process to resolve their indebtedness. It has been delayed for far too long. Hopefully the groundwork happening today will herald the early introduction of the machinery of the Act.
This will be the first time that guidelines have been issued which guarantee that a debtor will retain a minimum income before repaying debt. It is important to note that these are for insolvency only and that restricted income is a trade-off for debt write-off.
In addition, they are minimum - not maximum - guidelines and need to be interpreted in each individual case. Up to now, most consumers have had no idea what criteria banks are using to assess minimum acceptable income and from what we hear in FLAC, many have been pressed beyond acceptable limits.
FLAC has long called for these standards to be put in place for durable solutions that respect basic dignity. Therefore, we welcome the acceptance by the Insolvency Service that a reasonable standard of living does not mean that a person should only live at subsistence level. However, these guidelines were never going to be generous. FLAC remains concerned that these tight restrictions on income for the over-long payment periods set out in the insolvency scheme may cause arrangements to fail.
It appears that the guidelines set out expenditure categories with notional limits in each category, but it will be important that these are – as the guidelines say – for informational purposes only. Also we believe that housing costs will be dealt with separately.
It will also be important that the guidelines are reviewed on a constant basis, as this is new legislation with new schemes untested in Ireland. FLAC may want to take issue with some of the guidelines when we see them. We never anticipated that they would be extravagant and it is clear that debt settlement is painful wherever it takes place. But our experience is that debtors are already in pain and some are paying more in settlement than they should even now.
FLAC is using the launch of the guidelines and other regulations to raise again its serious concerns that those who are over-indebted must be supported with funded, adequate and timely information and advice. While these guidelines are useful, indebted consumers will need support in interpreting this tool in the context of debt negotiation. Personal Insolvency Practitioners will no doubt give this expert assistance to those declaring for insolvency.
For the much greater numbers who are not declaring insolvency but are seeking to restructure all their debt including their mortgage debt, there is no such assistance unless the person is supported by MABS or can afford to pay for advice. We also recognise that many professionals work pro bono. The government’s scheme of assistance whereby a person can avail of accountancy advice up to a limit of €250 is only available when the bank and the debtor have concluded negotiations and the bank has put its offer on the table. This, in FLAC’s view, is too late. Assistance is needed in the course of negotiation.
FLAC will continue to press for early implementation of the schemes outlined in the legislation and for reform of the considerable flaws that remain in the Act as well as other measures that deal with over-indebtedness.
- 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.
- FLAC's recently made a submission to the Central Bank's review of the Code of Conduct on Mortgage Arrears. We have also summarised our recommendations on the CCMA review.