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.
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