Short-term bankruptcy can be a bittersweet pill
At the corner of St Stephen’s Green and Earlsfort Terrace in Dublin, the finishing touches are made to Denis O’Brien’s ‘LXV’ building, which appears to be setting a new benchmark for post-crash office rents in the capital. .
It marks the return of burgeoning developer Bernard McNamara, whose company is building the office building. McNamara filed for bankruptcy in the UK, where it took him around 15 months to be discharged from debts of over € 1 billion.
His involvement in O’Brien’s shiny new block must remain in the throats of the 600 residents of the Longboat Quay building in Dublin Docklands.
Longboat Quay was one of the developments in the McNamara Rise, completed in 2006 with the Celtic Tiger price tags.
But it was poorly constructed and residents were told earlier this year that it was a fire trap and they either had to provide € 3.88million for repairs or vacate the area. .
Yesterday Cabinet decided to cut the length of Ireland’s bankruptcy from three years to just 12 months, reflecting the UK’s stance. It was a political initiative pushed by the Labor Party, which hopes it will win the votes of those who find themselves drowned in personal debt.
In July, the Oireachtas Joint Committee on Justice, Defense and Equality released its report and recommendation to the government on reducing the length of bankruptcy.
He had received 122 submissions from individuals and groups, most of them in favor of reducing the term to one year.
But there were some interesting objections to the move. The Lisduggan Credit Union in Waterford argued that a reduction “would be too easy a path for individuals to avoid having to assume reasonable liability for the debts incurred”.
Consumer advocate Brendan Burgess recommended that the default term be left at three years.
“The official assignee should have the right to ask the High Court to discharge the bankrupt earlier when the bankrupt has cooperated and there is nothing more to be gained by waiting three years,” he added.
The Irish Accounting Bodies Advisory Committee argued that the reduction in the term would not help a debtor stay in his family home and recommended that the term be kept at three years.
“The more you go bankrupt, the more people there will be who will benefit from the solution and the fewer will be those who will seek to pay their debts in full or seek informal or formal solutions to settle their debts with their creditors”, did he declare.
Lehane also warned that the reduction in duration could encourage bankruptcy tourism in Ireland.
He said many of these cases would be difficult to investigate and would place a heavy burden on the insolvency department’s resources.
In his recent memoir, Ivan Yates made the case for UK law enforcement by recounting his own experience of bankruptcy in Wales for a year.
Yates’ book details how he repeatedly sought, unsuccessfully, to achieve a fair settlement of his debts with AIB. The same cannot be said of all bankrupts.
Seán Quinn first tried to go bankrupt in Belfast until the Irish Bank Resolution Corporation blocked the move and forced his bankruptcy south of the border. Quinn was instrumental in the demise of Anglo Irish Bank, which cost the taxpayer the guts of € 30 billion, and, along with various family members, sought to frustrate the bank and its liquidators at all times as they sought to gain control of assets as collateral for its debts.
Quinn is now released from his three-year bankruptcy tenure and is reportedly working as a “consultant” for a company that was once part of the Quinn Group and is now owned by some of its former employees. This is good news for him, but little comfort for taxpayers.
Time will tell if the government was right to reduce the term to just one year. All we can say for sure is that there is no one-size-fits-all solution to the bankruptcy conundrum. Some will stink, in which case we will just have to cover our noses.
Twitter: @ CiaranHancock1