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First Debt Settlement Plan Approved in Ireland Today

It feels like a lifetime ago I first began working to bring debt settlement to the Republic of Ireland. Northern Ireland already has a form of debt settlement known at the Individual Voluntary Arrangement (IVA).

Not only did ROI not have any chance of a formal debt settlement approach to dealing with creditors, but there was also no real consumer bankruptcy available. Consumers in Ireland were trapped in debt.

My first meetings in Dublin were back in the early 2000s. At that time there was significant pushback from both banking regulators and consumer groups. All parties agreed that solutions were needed and the current process was broken but trying to get some agreement on moving forward was tough.

Since moving back to the U.S. I’ve been less involved in the process but it seems the early efforts eventually led to a process that resulted in the first official debt settlement plan being approved of today in Dublin.

The plan is different that the U.S. approach in that it requires the approval of creditors, much like the UK IVA. The U.S. approach has been significantly more of a shoot-from-the-hip effort where marketers took the lead and were apparently more interested in selling solutions, and not making sure they were actually effective.

Ireland took the more difficult first route which was to get the plans to work first and then sell them. The U.S. debt settlement approach is more a wish and a prayer while Ireland did it right.

In Ireland when more than 65 percent of creditors agree to the debt settlement plan it becomes binding on all creditors named. Imagine if we had those same capabilities in the U.S., the whole debt settlement landscape would have been drastically different and debt settlement would be a growing and thriving enterprise.

The debt settlement industry of the mid-2000s in the U.S. totally blew their chance to develop a robust debt settlement industry by focusing on profit taking and fighting against fee regulation rather than putting forward a legally binding process and trying to get new consumer centered regulations passed.

Ronan Duffy, the insolvency practitioner for the first Irish debt settlement case is a great guy and it is so nice to see he managed to get the inaugural case through. He’s worked hard in this field and deserves this win.

Under the new Irish debt settlement process the debtor will make payments based on their income and expenses and at the end of five years the remaining debt will be forgiven.

First Debt Settlement Plan Approved in Ireland Today
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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • http://www.avoidbk.com/ Jared Strauss

    This is great news for Ireland consumers and it’s the exact approach that should be implemented over here. Steve, are you familiar with whether or not they allow for a certain amount of missed payments over the duration of the plan?

    • http://GetOutOfDebt.org/ Steve Rhode

      I’m not sure if they’ve slipped anything technical in but a creditor can fail the debt settlement plan if more than a few payments are missed. In my experience with similar plans in the UK there is generally a reasonable amount of leniency without abuse. Missed payments need a plan to bring them current. When creditors fail the plan it’s back to square one, like a chapter 13 bankruptcy.

      • http://www.avoidbk.com/ Jared Strauss

        Hopefully they did build it in. Allowing for a certain amount of flexibility to consumers that move forward with this approach will be the key to their overall rate of success.

        Beyond that, this approach really eliminates the majority of the issues that plague a long-term debt settlement approach here in the United States.

        It’s non-adversarial since all of the enrolled creditors are being paid monthly. And because of that, it shields the consumers from the long-term stress that is associated with collection attempts, exposure to lawsuits, exposure to interest, and most importantly, the exposure to the uncertainty of their outcome.

        Eliminating these sources of stress is crucial for success, since it allows the consumer to focus their attention on improving themselves, rather than dealing with the constant challenges that I listed above.

        And, furthermore, what a great opportunity for recovery for the consumers and creditors alike. Combining a plan with a 5 year duration, with the metric of the consumers ability to pay, will make this approach available to a much higher segment of consumers.

        We should definitely run with this model over here.

      • http://GetOutOfDebt.org/ Steve Rhode

        The UK plan is specifically why I moved to the UK for three years to help consumers over there. Now keep in mind the solution is based on a prorrata portion of available income. The consumer is represented by a third party who determines what percentage of income is available for debt repayment and that is divided up amongst creditors based on the percentage of debt owed. The consumer is left with the ability to save and repay debt, as they can afford, at the same time.

        Moreover, this is not bankruptcy but an official and binding plan to resolve consumers debts. And now you can see why i was so intrigued with their solution that I moved there to study it.

      • http://www.avoidbk.com/ Jared Strauss

        I absolutely do. You know, with all of the consolidation that’s taken place in our banking industry, you would think that this approach could be easily implemented. I fail to understand why our big banks don’t seriously pursue this method, as they would be a big winner too via increased recovery.

      • http://GetOutOfDebt.org/ Steve Rhode

        Here is the really crazy part. The big U.S. banks in the UK at the time participated in the plans and Capital One and Bank of America had no problems with the approach, accept from wanting more control like they have in the U.S.

        Yet, it’s not good enough for U.S. residents. Why?

      • http://www.avoidbk.com/ Jared Strauss

        That’s a great question. I wonder if they would comment on that if you approached them…

      • http://consumerrecoverynetwork.com/ask-a-question/ Michael Bovee

        I think we are getting closer to something like this happening here. Perhaps not fully formed from a legislative and regulatory mandate, but a combination of that type of framework; mixed with market and economic realities; and a strong showing of money interests willing and voluntary participation.

        The consumer debt market is going to get interesting in 2014/15.

      • http://www.avoidbk.com/ Jared Strauss

        An informal, non-legislative approach would be even better, as it could allow more room for versatility. Like you said, it just takes willing participants. It will be interesting to see if the creditor community embraces this approach with the right type of qualifiers in place.

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