July 7 2013
Debt law will allow mouse to scare cat
Vincent P Martin
We need to rid ourselves of the stigma of bankruptcy in this country, writes Vincent P Martin
THERE are tens of thousands of ordinary families in Ireland who, without a Nama or a bailout, are forced to bear the full brunt of the madness of crazy developers or bankers. That small unit of people, bound together by something more than money has, for the crime of buying a modest home, been lumbered with unmanageable debt.
These families know that they face a David and Goliath battle. They know that they can protest on the streets and that however big the protests are, nothing will come of it. This is a game of cat and mouse where the bank plays with the family, against the dark backdrop of a threat that should the family not behave, legal proceedings for possession of their home will commence. The family will be evicted and hounded for the balance of the monies. Lawyers will have to be paid and interest will continue to accrue. It is in this context that borrowers bow down and beg for mercy.
The Code of Conduct comprises rules primarily adopted for the big cat. The cat agrees not to devour the mouse until the mouse has run a thousand laps. But in the end the mouse will fail and his death is inevitable. For it is ultimately an imbalance of power. In one corner, we have the might of the financial world backed by the laws of the State. And in the other we have a family – mum, dad and children.
The spectators, commentators and advocates beg the cat to behave in a codified way. They fill the airwaves denouncing the cat and wish earnestly that it was otherwise. But it is all a misguided waste of breath for the end is already written in stone.
But the balance of power will shift very shortly, when the Personal Insolvency legislation is commenced.
Borrowers will have the power to turn the tables on the banks and instil some of their own terror by genuinely threatening bankruptcy. Throughout the commercial world, it is the only thing which scares the living daylights out of these austere profit-driven institutions. The time has come for borrowers, after taking professional expert advice, to look the banker in the white of the eye and say, "continue to treat me with disdain and I will pull the lever of bankruptcy and you won't get one penny".
In order to deliver that strategic punch credibly, one must first understand bankruptcy itself. Bankruptcy is a term of opprobrium in Ireland, but properly understood, it can offer salvation. Ridding ourselves of the stigma of bankruptcy has to happen. Walt Disney, Donald Trump and Abraham Lincoln are just three examples to prove that it can be much better to start afresh, debt-free.
Bankruptcy means that your debts are wiped out in three years. It does not matter how big they are – the consequence of bankruptcy is the same – the slate is clean.
What is there to fear in bankruptcy? The answer is life goes on as it did before. If you had a job, you continue to have a job. In some cases, you continue to stay in your home. The process in the three years is to take what you have left after reasonable expenditure and give it to your creditors. But for most people, there is nothing left so the creditors get nothing. The bank can repossess the house if it wants to, but it could always do that anyway. If banks enter a voluntary arrangement with a debtor, they will recoup much more monies but if they refuse to strike a fair and reasonable arrangement, the bank must be left in no doubt what the alternative is for them.
Vincent P Martin is a barrister and co-founder of New Beginning which campaigns for Ireland's recovery and seeks to find a fair and sustainable solution to the problem of over-indebtedness.