Ireland's Minister For Justice has just announced that corporate and consumer bankruptcy debtors will now be able to exit reorganization after 5 years as opposed to 12 years; but only after certain conditions are met. The new law will also grant bankruptcy discharges to 300 people in Ireland who have languished in the country's bankruptcy system for more than 12 years. But while some are pleased with the changes to Ireland's bankruptcy system, some are not satisfied.
Small business group ISME welcomed the news, saying that it hoped this would be a step towards bringing what it called 'our antiquated bankruptcy laws' in line with the UK, where the bankruptcy discharge period can be as short as one year. Chambers Ireland also welcomed the plan.
But the Small Firms Association said the proposal did not go far enough. 'What we need is immediate action by the Minister to separate out legitimate business bankruptcies from consumer bankruptcies, which would enable a one-year automatic discharge for bankruptcy to be workable for the insolvency services,' said SFA director Patricia Callan.
That's right-Ireland does not differentiate between businesses and individuals filing bankruptcy. The bankruptcy system we have here in the United States is really advanced compared to many countries. Not only does the system understand that there really is a difference between a business filing bankruptcy and an ordinary person; but the bankruptcy system allows fast reorganizations of debt. This fast reorganization of debt allows companies to take chances, make mistakes and not be permanently punished for those mistakes.
How many companies and individuals would be willing to take financial risks if they knew that they could not discharge debt in bankruptcy until 12 years into the future? Not many. But it is innovation and risk taking which drives our society and economy. But all that innovation and risk taking some times causes financial problems and that's why we have bankruptcy.