Repayment of debt has been the topic that has dominated global and Irish headlines over the past few years. Indeed, Ireland’s Law Reform Commission devoted two annual conferences to the subject of debt and debt management in that time. It also published a detailed analysis of the civil debt enforcement regime here and made numerous recommendations for its reform. Among those was the abolition of imprisonment of debtors, arising out of the non-payment of civil debts. This recommendation is now being implemented, when commenced, by the enactment of the Civil Debt (Procedures) Act 2015.
Abolition of Imprisonment for Non-Payment of Judgment Debt
In the context of bad debt, it is worth noting the frequency with which creditors employed this option in the past. The Courts Service Annual Report for 2014 noted that just 72 committal orders were made by the District Courts across the country. Even then, the Irish Prison Service confirmed that in 2014, a total of 23 debtors were committed to prison, arising out of non-payment of civil debt - i.e. for contempt of court-ordered instalment repayments. When compared with the numbers of judgments marked across the Irish Courts in the preceding years, 29,867 in 2012; 24,920 in 2013; and 14,875 in 2014, it seems that the committal order was not a remedy normally used by creditors, bar in exceptional cases.
This certainly has been the case since the successful High Court challenge to the legislation underpinning the instalment and committal order regimes in the 2009 Caroline McCann caseand the subsequent enactment of the Enforcement of Court Orders (Amendment) Act 2009. Since that Act, a creditor effectively had a heavy onus to prove that a debtor against whom a committal order was sought, was indeed a person who could pay, but chose not to, through wilful refusal or culpable neglect, as opposed to a debtor who could not pay the relevant debt. However, even if a creditor now knows that a debtor is simply wilfully refusing to pay a lawful debt, which may even be the subject of a judgment and instalment order, that creditor will no longer be able to seek the arrest and imprisonment of the debtor.
In speeches to the Dáil on the legislation, Minister Fitzgerald has commented that its provisions arise from recommendations made by the Law Reform Commission, yet she did not address the fact that the removal of committal to prison, be balanced by another remedy or deterrent, particularly that of a community service order.
Attachment of Earnings/Certain Social Welfare Payments
The Act also provides for a new remedy of attachment of earnings, whereby a judgment creditor may seek a court order directing a judgment debtor’s employer, or the Department of Social Protection in cases of certain social welfare payments, to deduct specified sums from the debtor’s earnings (social welfare receipts) and pay these over to the creditor.
There are two very important conditions upon a judgment creditor’s ability to seek to use this new remedy:
- the debt due at the time of the application must be between €500 and €4,000; and
- the debt does not include debts arising out of the repayment of credit provided by a bank, building society, credit union, or other authorised credit provider.
The Act goes on to provide for a number of safeguards for debtors who may be the subject of an attachment application by a judgment creditor, chiefly that the debtor be afforded an opportunity to make representations to the court before the court may make a decision on the application, though compulsion of the debtor’s attendance is not a pre-requisite to an attachment order being made. The court is also required to take into account the debtor’s capacity to repay the debt in terms of the amount it orders to be attached and there are provisions for the variation or termination of the order if the debtor’s circumstances change materially.
The rather low threshold amounts for triggering the attachment remedy has led many commentators, not least those senators who made submissions on the legislation as it passed through the Dáil, to conclude that it seems to have been designed with utility debt and in particular amounts due to Irish Water, in mind. The Minister had been at pains to stress though that the Act’s introduction would be of benefit to small businesses particularly, while others such as FLAC noted, in a submission on the draft legislation, that it is frequently other self-employed persons that owe debt to such businesses and this legislation may not assist them greatly.
Nonetheless, as the Minister noted, the introduction of attachment of earnings as a debt enforcement remedy, has long been called for in Ireland. To that end, she has repeatedly referred to the Act as “balanced”. However, the judgment debts that can form the basis of attachment applications, excludes most debt owed to banks and other regulated lenders. Coupled with the very narrow window for amounts that attachment can be used for (€500 to €4,000 balances), it means that from most creditor’s standpoints, the suite of remedies that they could potentially rely upon to compel repayment of debt has been diminished.
While imprisonment has been rarely used by creditors in recent years, and its abolition is not unwelcome, nonetheless its availability may have had a material deterrent effect on certain hardened debtors. This ultimate sanction has now been removed with no replacement, despite the recommendation of the Law Reform Commission.