The Quiet‐Loud‐Quiet Politics of Post‐Crisis Consumer Bankruptcy Law: The Case of Ireland and the Troika

Abstract

A decade after the Global Financial Crisis, many developed economies continue to strain under excessive household debt. This article presents evidence suggesting that the failure of policymakers to enact debt relief measures may lie in the superior influence of the coordinated and concentrated financial sector over legislative processes, as compared to the diffuse and disorganised interests of consumer debtors. Post‐crisis popular interest in technical issues of personal insolvency law created only a narrow space of political opportunity. Soon these questions returned to the domain of technocratic actors and corporate influence. The article examines this situation through an inter‐disciplinary case study of consumer bankruptcy reform in Ireland under ‘Troika’ supervision. Proposals initially billed as assisting over‐indebted households developed into increasingly creditor‐friendly legislation in ‘quieter’ stages of technocratic decision‐making. The stark implications of these findings highlight obstacles to resolving household debt problems and consequent risks of economic and political instability.

The Debt Relief Notice: Its Effectiveness in Improving the Financial Well-Being of Over-Indebted Individuals and Its Impact on Social Mobility

“…The LRC had recommended the implementation of an insolvency remedy like that of the DRO and even recommended a similar procedure whereby individuals with 'limited resources could obtain debt discharge after a period of one year without the need to make part repayments to their creditors' (Spooner, 2012: 293). However, this was ignored in the policy formation, and a shift towards a debt collection paradigm was chosen instead (Spooner, 2018). This may be representative of pro-creditor legislation made in 'quiet politics', despite opposing opinion in the 'louder' public consultations (Spooner, 2018).…”

“…However, this was ignored in the policy formation, and a shift towards a debt collection paradigm was chosen instead (Spooner, 2018). This may be representative of pro-creditor legislation made in 'quiet politics', despite opposing opinion in the 'louder' public consultations (Spooner, 2018).…”

“…A DRO-style approach to the assessment of income increases could remove the barriers to employment currently faced by debtors with a DRN, thereby enabling individuals to reach their future financial goals and attain a higher financial well-being. Considering similar policies to the DRN in other jurisdictions have the sole purpose of debt relief, the debt collection function in the DRN legislation appears as an 'idiosyncratic aspect' (Spooner, 2018).…”

Financing Prosperity by Dealing with Debt

“…Irish post-crisis reforms founded on voluntary renegotiation were widely accepted as ineffective. This even caused legislators to depart from their initial consensual model to introduce a procedure under which courts could impose debtrestructuring solutions in cases in which creditors have unreasonably refused a debtor's proposal (Spooner 2018). Prior experience across a number of countries suggests there are great advantages, therefore, in mandating desirable public-policy outcomes through bankruptcy, rather than waiting in vain for creditors to agree to the concessions necessary for such outcomes to arise.…”