Like it or loathe it, bankruptcy is the key to economic recovery. Northern Ireland's progressive 'second-chance' system means that acknowledging bad debt could be the first step to ending a dangerous cycle and getting a fresh start
Less than a week ago, all hope of economic recovery seemed lost when the Department of Enterprise, Trade and Investment announced unprecedented levels of bankruptcy, up almost 20% on the last quarter. Those in search of a silver lining may have taken some comfort from the fact that corporate insolvencies were down but all is not as it seems. Believe it or not, the real hope is actually in the bankruptcy figures, as grim as they might appear.
One of the most dangerous obstacles to economic recovery is denial of both the scale of the crisis and of the actual debt involved - carrying on regardless is not an option in the face of blatant insolvency. The quicker bad debt is acknowledged and crystallised the better. It removes the uncertainty, the angst and the turmoil. Once a debtor recognises their liabilities are unsustainable, bankruptcy is often the next natural step because it offers lasting debt relief. It provides an orderly system for the assessment and realisation of a debtor's assets while creating a clear cut-off point for creditors to ensure that a debtor does not further jeopardise their position.
Like it or loathe it, bankruptcy is, therefore, the key to economic recovery. It breaks the otherwise endless cycle of debt and provides a fresh start.
In a recent lecture, the Bankruptcy Master described what she considers to be 'the road to bankruptcy' which narrows as it hastens towards court. It is the perfect analogy for the process but lucky for us, it does not lead to a dead end.
Unlike the Republic where bankruptcy lasts for 12 years, the system in Northern Ireland is much more progressive and has been modelled on a 'second-chance philosophy', in recognition that honest failure is an inevitable part of every economy.
To extend the analogy, bankruptcy is like roadworks, often long overdue, invasive and time-consuming but we all accept that they are necessary and remedial because once they are finished we will have a smooth, new road.
Bankruptcy is a process, not a quick fix, but at least if the rates are rising it means we are no longer in denial and the real work needed to rebuild the economy can begin.
Maria Glover is an associate solicitor with Napier and Sons