The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A well-known QC yesterday backed calls to urgently reform The Bahamas' ancient personal bankruptcy laws as a way to save hundreds of persons from a "deep financial grave" post-COVID-19.

Fred Smith QC, the Callenders & Co attorney and partner, told Tribune Business that overhauling an Act passed in 1870 was essential to ensuring that many Bahamians' "economic existence is not brought to a grinding halt" when they are unable to meet their debt obligations amid the pandemic's fall-out.

Echoing pleas made earlier this week by Ed Rahming, the Bahamian accountant and insolvency practitioner, Mr Smith said: "I have always contended that our personal bankruptcy laws are far too draconian, working as they do like a financial guillotine, severing a bankrupt from economic opportunity in the future.

"I would urge the Government to reform the personal bankruptcy laws so that they give a greater amount of flexibility and ability to also, at the same time, when people fall on hard times to provide a stepping stone to recovery as opposed to a deep financial grave.

"I think that the COVID-19 experience shows us that the old way of doing business, where people are severely financially punished for a default, are over. Frankly, even without the pandemic and economic effects of it, banks, insurance companies and creditors of people personally, and companies, shouldn't be able to being a person's economic existence to a grinding halt."

Instead, Mr Smith joined Mr Rahming in advocating that there be a process that allows the likes of a Supreme Court judge or bankruptcy trustee to "find a compromise that would keep economic activity going".

Mr Rahming, the Intelisys (Bahamas) founder and managing director, told Tribune Business earlier this week that COVID-19 had made it "more important than ever before" to modernise personal bankruptcy laws dating from 1870 and give debt-shackled Bahamians the opportunity to free themselves from a burden that could last most of their working lives.

He argued that the Act needed to be reformed such that debtors have "options" enabling them to work out legally binding agreements with their creditors to repay some of what is owed under the supervision of the Bahamian court system.

Mr Rahming suggested two options, the first being a "consumer proposal" where a debt-stricken person agrees to pay a percentage of their unsecured debts over a five-year period in exchange for the remainder being fully forgiven. This would avoid the stigma of being declared bankrupt while providing debt relief, with the newly-formed Credit Bureau monitoring to make sure no new debt is taken on.

He also called for a "bankruptcy" alternative where insolvency practitioners would liquidate the assets of persons unable to repay their debts, with the sums recovered used to pay-off the amount outstanding 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 marked a sharp change from the current creditor-driven process, where a court-appointed trustee takes over every asset and aspect of life for Bahamians who are declared bankrupt, with the impacts "severe" and long-lasting.

And, with COVID-19's fall-out of high unemployment and reduced incomes likely to be with The Bahamas for some time to come, Mr Rahming argued that it was vital to act now given that increasing 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 1870 was reformed, along with its accompanying rules that were brought into effect in 1958, numerous Bahamians will be "left behind" and condemned to a life on the margins unable to participate in the formal economy due to the debt burden they are carrying - something that would result in "economic instability" and "social unrest".