Irish Bankruptcy Reform Takes Cues from America’s Chapter 13
A good friend of mine is from Ireland. He immigrated to the US in the early 1990s, looking for better opportunities in the USA.
Over the years, he has shared comparisons between our bankruptcy laws and those in Ireland with me, and has told me that in his opinion, Irish bankruptcy law is stuck in the 1800s. A few years back, only a dozen people a year or so would file for bankruptcy in all of Ireland, a country of several million people.
The reason for this is that the Irish bankruptcy laws require a minimum 12 year repayment plan, and Irish creditors could “vote” to hold Irish debtors in bankruptcy even longer if they felt that you had not paid enough back.
Fast forward to the financial crisis and recession of 2007-2012. The Irish housing market had skyrocketed (even more than here in the US), and many people were under water on houses.
Something had to be done to reform the Irish personal bankruptcy laws.
The result is interesting:
- There is a three-year partial repayment for people who owe less than $20,000 Euros (about $26,000 US dollars), after which there is a discharge to the extent that the funds are not fully repaid when there is no secured debt.
- For individuals who owe more unsecured debt, there is a five-year payment plan. After 5 years, the debts not repaid are eligible for discharge.
- If an individual owes secured debt up to $3,000,000 euros (about $4,000,000 us dollars), then the Irish debtor will have a six-year repayment plan and can also settle (discharge) unsecured debt like credit cards and medical bills.
In the US, we have a chapter 13 plan that is similar, but is based more on income. US citizens can discharge/payback up to about $365,000 in unsecured debt. US citizens are allowed to have well over $1,000,000 in secured debt and still be eligible for a Chapter 13 plan. The amount that US bankruptcy filers have to pay and the amount that can be discharged is a tricky calculation that is based upon income. The result of the calculation also depends upon the type of debt.
In the US, there is a three-year partial payment plan for lower-income debtors and a five-year partial repayment plan for higher income debtors.
I think the Irish copied us here in the United States. What do you think?