Bahamas urged to remove bankruptcy burden now


• Accountant: COVID makes reform urgent

• Proposes alternatives to the 1870 legislation

• Warns too many years where top earnings are lost


Editor-in-chief of the Tribune

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The Bahamas must urgently modernize its centuries-old personal bankruptcy laws to prevent hundreds of people from being marginalized after COVID-19, a top accountant warned yesterday.

Ed Rahming, founder and chief executive of Intelisys (Bahamas), told Tribune Business that the pandemic has made it “more important than ever” to modernize laws dating back to 1870 and give indebted Bahamians the chance to break free from debt. a burden that could last most of their working lives.

Writing today in a column on page 2B of this newspaper, Mr Rahming argued that the law needed to be reformed so that debtors had ‘options’ to enter into legally binding agreements with their creditors to repay part of what is owed under the supervision of the Bahamian court system.

He suggests two options, the first being a “consumer proposal” where someone in debt agrees to pay off a percentage of their unsecured debt over a period of five years in exchange for completely forgiving the rest. This would avoid the stigma of being declared bankrupt while providing debt relief, with the new credit bureau monitoring to ensure no new debt is incurred.

Mr Rahming also called for an alternative to “bankruptcy” where insolvency practitioners would liquidate the assets of people unable to repay their debts, with the monies recovered being used to repay the outstanding amount on a monthly basis. Once the debts are cleared – something he suggested could be achieved in 12 months – then the debtor is discharged.

The Intelisys chief said this marks a step change from the current creditor-focused process, where a court-appointed trustee takes over all assets and aspects of life for Bahamians who are declared bankrupt, with “serious” and lasting impacts.

And, with the fallout from COVID-19 on high unemployment and reduced incomes likely to be in the Bahamas for some time to come, Mr Rahming argued that it was vital to act now given that a Growing numbers of Bahamian individuals and households will be unable to service their debts once lenders end their payment deferral initiatives.

He told this newspaper that unless the Bankruptcy Act of 1870 is reformed, along with its accompanying rules which came into force in 1958, many Bahamians will be ‘left behind’ and condemned to a marginal life unable to participate in the formal economy due to the burden of debt they carry.

Warning that the wider consequences involve “economic instability” and “social unrest”, Mr Rahming – himself a well-known insolvency practitioner – said he had personally dealt with bankruptcy cases where debtors brought home only $40 a week from their wages.

“The bankruptcy law is from 1870, and the accompanying rules are from 1958,” he told this newspaper. “It’s very outdated. It’s very creditor-focused, and it’s not the best process for debtors to be proactive and try to work out settlements with creditors.

“It is absolutely necessary. There are many people who find themselves in difficult circumstances who could benefit from a court-supervised process, and proactively propose settlement arrangements with their creditors, and move on with their lives instead. than being burdened with so much debt for most of their earning years.

“The Bahamas has changed a lot since 1870. The way credit is allocated has changed significantly since 1870. The Bahamas is not where it was before, so people who find themselves burdened with debt need more options than to be hammered on the run by an 1870 bankruptcy law and lose much of their livelihood in terms of assets and reputation, Mr Rahming added.

“Whatever assets they have, they are currently losing. Adopting more modern, more lenient laws and allowing them to proactively sell their assets. Rather than being a burden on society, they can quickly settle with creditors the position they find themselves in so that they make a fresh start, start over and learn how to manage debt.

“What happens now is that people who find themselves in a precarious situation with more debt than they can pay off on a monthly basis, it continues with them for an indefinite period; a long time. time it causes instability in the economy because we have so many people who are shut out of the market and unable to buy a house because they have too much debt.It will eventually cause social unrest.

Mr Rahming argued that a modernized bankruptcy law, which allowed debtors to “get back on their feet” under the supervision of courts and credit bureaus, was now “more important” than ever because of the impact of COVID-19.

Acknowledging that the effects of the pandemic are “just beginning” and could “get worse before they get better”, he added: “I think more than ever before modernization of bankruptcy laws is needed to ensure that people are not left behind. what’s going on in the economy right now. People are unable to service their debt and we don’t know when we will get out of it.

“In the Bahamas, bankruptcy is currently not an option for many people and it is very stigmatized. If we modernize the laws, I think you will find that more people will participate in the process and continue their lives as a bankrupt. opposite of what is happening right now with a class of people, a group of people, living on a monthly basis, unable to make ends meet because they took on so much debt at a young age.

“Modernizing bankruptcy laws so that their needs can be met in a modern, accountable and transparent way would lead to more stability in our economy and more people able to participate in the market and earn a piece of the economic pie.”


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