Dáil Éireann debate -
Tuesday, 18 Oct 2011

Vol. 744 No. 1

Debt Settlement and Mortgage Resolution Office Bill 2011: Second Stage

Deputy Michael McGrath

I move: "That the Bill be now read a Second Time."

I wish to share time with Deputies Calleary and Kirk. I am pleased to commence the debate on the Debt Settlement and Mortgage Resolution Office Bill 2011. Essentially, the Bill proposes the establishment of an independent, non-judicial debt settlement system for persons experiencing severe problems with personal and mortgage debt. I acknowledge it is based on the recommendations of the Law Reform Commission's report on personal debt management and debt enforcement, which was published on 16 December 2010, and the associated draft personal insolvency Bill, which the commission published at the time. We have decided to extend the scope of the draft personal insolvency Bill to include the growing problem of mortgage debt by using a separate process established under the legislation. The Law Reform Commission is to be commended for its excellent work in this area and we believe the Oireachtas should be favourably disposed to accepting the broad thrust of the recommendations the commission put forward. For anyone with an interest in this area, the Law Reform Commission's report is well worth reading. It is appropriate that the commission's recommendations form a central part of the Bill before the House.

The need for a reform of Ireland's personal insolvency regime and, as part thereof, the establishment of a non-judicial debt settlement system has been advocated by a range of organisations and persons with expertise and experience in this area. This is a truly landmark item of legislation. I hope it will receive the support of this House and will be allowed to proceed to Committee Stage for more detailed consideration. I wish to emphasise strongly that the Bill is being put forward by Fianna Fáil on a non-partisan basis. This issue should not be about the Government versus the Opposition. We all have a stake in ensuring this issue should be addressed in a considered and comprehensive way. I have no doubt the Bill can be improved by the collective wisdom and experience of members of this House. My party is open to amending it on Committee Stage in order to ensure we achieve the best possible system for dealing with personal indebtedness.

Those who are members of all political parties and none have a duty to come up with solutions which can assist those struggling with high levels of personal debt and people experiencing difficulties in making mortgage repayments on their family homes. I sincerely hope the Government will consider the Bill in the spirit in which it is being offered. The Bill can form the basis of a radical overhaul of Ireland's personal insolvency regime and can allow thousands of distressed borrowers to see some light at the end of the tunnel. That is what lies at the heart of this legislation. There are thousands of people for whom personal and mortgage debt is making daily life a misery. They can see no light at the end of the tunnel. The nuclear option of bankruptcy is not appropriate in the great majority of cases. Having a debt settlement system which is transparent, fair and can result in definitive solutions tailored for individuals lies at the core of the Bill. I look forward to a full and constructive debate on the Bill.

I wish to make clear that the Bill does not provide an easy way out for anyone. It contains strict checks and balances which are designed to ensure that responsibilities as well as rights will be imposed on borrowers. The priority with this Bill is to assist those who are in genuine difficulty and who will not be able to meet their commitments as they are currently structured. It is appropriate that consideration of the Bill should coincide with the debate on the Keane report, to which I contributed earlier. The Cooney report, the Keane report and organisations such as the Free Legal Advice Centres, FLAC, have all called for a system of non-judicial debt settlement to be put in place. The Keane report, which was published last week, states "Early introduction of reformed bankruptcy law and new non-judicial debt settlement arrangements is vital ... the group does not see a resolution to the mortgage problem without it". The Cooney report, which was published last November, states:

The Group is of the view that significant reform is now required in regard to Ireland's personal insolvency regime. Such reform must have the broad objective of bringing about an efficient and cost-effective process for the settlement of arrears of personal debt.

On Friday last, I had the pleasure to attend a financial services conference in UCC at which the head of financial regulation at the Central Bank, Mr. Matthew Elderfield, made a speech. On a number of occasions during his contribution, Mr. Elderfield indicated that resolving the mortgage arrears crisis is not possible without the implementation of fundamental reforms to Ireland's personal insolvency regime and the establishment of a statutory, non-judicial debt settlement system.

It is time to update this nation's insolvency law to make it comprehensive, effective, and cost efficient. This has already been done in countries such as Germany and Sweden. Those who are in debt or who have mortgage arrears do not have to feel alone or helpless when facing the banks or their creditors. The system which the Bill proposes to create would ensure that all debtors and mortgage holders will be treated fairly and consistently by these entities. Assisting people to move towards paying their debts and their mortgages in a restructured manner will not only help the position of individual borrowers, it will also be a crucial step towards reinvigorating the social and economic well-being of the State.

I propose to comment on the main elements of the Bill, which make provision for the creation of the debt settlement and mortgage resolution office. The latter would be situated within a newly formed debt enforcement office, which would be responsible for the general oversight and management of debt enforcement procedures carried out by newly appointed debt enforcement officers, including putting in place an internal mechanism to handle appeals. A creditor would be able to apply to the debt enforcement office to seek an enforcement mechanism and the officers would seek to obtain information that would be as comprehensive as possible in order to adjudicate on the application. The office would then determine whether enforcement was possible and appropriate. A creditor or debtor could then appeal this decision to the office.

Under the Bill, an individual debtor could apply to the debt settlement and mortgage resolution office for a debt settlement arrangement or a debt relief order and a financially restricted mortgage holder could apply for a mortgage resolution order. This means there are three key processes catered for in the Bill, namely: a debt settlement arrangement, where a borrower's personal debts could be restructured following negotiation with creditors; a debt relief order, where an insolvent debtor could apply to have a personal debt rescinded; and a mortgage resolution order, where a mortgage holder could apply to the office to have his or her mortgage restructured and a binding order issued.

I will deal first with the debt settlement arrangement. If debtors find themselves unable to meet their personal debt commitments but are in a position to make some form of payments, there would be a process under the newly created office which would allow them to apply for a licensed personal insolvency trustee to examine the full picture of their financial affairs in considerable detail and to negotiate with their creditors to put in place an agreed debt settlement arrangement. Such an arrangement is an agreement between a debtor and his or her creditors, facilitated by a personal insolvency trustee, that establishes a set of terms and obligations between the two parties which will improve the position of the debtor to pay his or her debts.

The arrangement process would begin when a debtor applied for a debt settlement arrangement with the new office envisaged under the Bill. A personal insolvency trustee would review the application and the debtor's financial information in detail and confirm that he or she will serve as the debtor's trustee. It would then be the trustee's responsibility to hold a meeting with the debtor to discuss the arrangement and other various options, such as bankruptcy and debt relief order, to determine the best option for the debtor in regard to his or her individual situation. The process would continue with the trustee summoning a creditors' meeting and preparing a proposal on behalf of the debtor to be sent to that meeting. The creditors would then meet to review the proposal and would cast a vote to accept or reject the proposed debt settlement arrangement. The latter would have to be approved by a 60% majority on creditors, in value terms. Once passed, it would then be binding on all creditors who were eligible to vote and would come into effect 30 days later. The debt settlement arrangement essentially involves restructuring a person's personal debts over a period of up to five years. The overall value of a debtor's personal debts can be reduced through this restructuring arrangement. Once a debt settlement arrangement comes into effect a creditor cannot object to the arrangement, present a bankruptcy petition against the debtor or try to commence legal proceedings to recover any debt. Enforcement officers will also be prohibited from enforcing any judgment that seeks the debt owed by the debtor. These are key protections afforded to a debtor under the system. However, if a debtor fails to meet his or her obligations under the arrangement, the arrangement shall be deemed to have failed and will be revoked.

It is important to point out that small business-related debts can form part of the debt settlement arrangement. For example, this provision gives real hope to the thousands of people who were formerly self-employed in the construction sector but are now living with legacy debts after the collapse of their business, and those debts can also be considered as part of this process.

Debtors who are deemed to be an insolvent debtor under regulations to be issued to the office by the Minister may potentially obtain a debt relief order in which they may be relieved of some or all of their debts and liabilities. To do so, a debtor must first seek assistance from the Money Advice and Budgeting Service, MABS, to prepare and complete a comprehensive debt relief order which MABS will communicate to the office. Once an order is granted, a creditor cannot commence any legal proceedings for recovery of a debt in the debt relief order for a period of 12 months after the order has been granted.

At the end of the 12 months, the debts included within the debt relief order will be discharged. The office can amend or terminate the order if it finds that its conditions have been compromised or if the debtor no longer carries out his or her obligations. The debt relief order is not an easy way out for a debtor. Section 38 of this Bill puts an onus on the debtor to engage fully in the process. There is an obligation to co-operate fully, to make available all requested documents and financial information and to inform the office of any material change in his or her circumstances, particularly an increase in the level of the debtor's assets or income. A debtor who knowingly conceals, refuses to produce, or produces falsified documents as part of the process will be guilty of an offence and is liable to penalties under the Bill. This is to ensure that only genuine debtors can avail of this process.

With regard to mortgages, whereas banks and borrowers have successfully renegotiated mortgages in many cases to date, this involves the straightforward options of allowing the borrower to move to interest only payments, extending the term of the mortgage, changing the repayment amount and capitalising arrears. It is necessary to have an independent office which can impose a solution that is binding on both parties and which is tailored to the individual circumstances of the mortgage holder. Therefore, this Bill allows for a mortgage holder to apply for a mortgage resolution order in respect of a family home mortgage. Such an order effectively acts as a binding arrangement between the mortgage holder and the financial institution. The order can only be granted if the mortgage holder is deemed to be ‘financially restricted' — the definition of this is to be set out in guidelines issued by the office taking account of reasonable living expenses and so forth. The mortgage holder must be the owner of the mortgaged property, have resided in that property for the two years prior to making the application, have provided written confirmation that they will not sell or lease the property, and have not previously been granted such an order. The office can refuse a mortgage resolution order, as outlined by specifications within the Bill, but must provide the reasons for doing so.

The mortgage resolution order process begins when a debtor applies for a mortgage resolution order in the office. The office will then submit the application to the financial institution that provided the mortgage within 14 days of receiving the application. The financial institution must provide a written a response to the office, stating whether it accepts that the mortgage holder is financially restricted and that the mortgage is unsustainable. If it accepts the mortgage holder's application and the mortgage holder accepts the financial institution's response, the debt settlement and mortgage resolution office can then amend the terms of the mortgage. The office can amend a mortgage under such an order through some specific mechanisms laid out in the Bill, including interest only payments, mortgage extension, repayment holiday, interest rate adjustment in certain circumstances, debt for equity, deferred interest schemes and mortgage to lease. There are other options which can also be incorporated into the Bill, including the split mortgage proposal advanced by New Beginning. The full range of options should be included.

Once a mortgage resolution order has been put in place, a financial institution cannot take any action to secure repayments above and beyond what is in the order or seek repossession of the home that has been included in the order. There are other provisions in the Bill relating to debt enforcement procedures which can be examined at a later stage. It is essential that such a body would have a board comprising people with real experience and expertise in the area. Groups such as FLAC, New Beginning and MABS should be included in the process. I hope the Government will consider this Bill as a constructive proposal on a non-partisan basis and will be open to accepting the Bill in order for it to be fully debated on Committee Stage. I know every Member in the House has an interest in putting forward real solutions in this area to ensure that people with unsustainable levels of personal and mortgage debt can receive assistance.

Deputy Dara Calleary

I compliment Deputy Michael McGrath for introducing this Bill, the latest in a series of initiatives he and our colleagues in the Seanad have introduced to address the issue of mortgage and personal debt, the growing level of which is a potential tsunami facing this country. As Deputy McGrath outlined, under this Bill a person struggling to cope with personal debt can apply to a new office for a debt settlement arrangement. Following a comprehensive assessment of that person's financial affairs, a personal insolvency trustee makes a proposal to the person's creditors.

Deputy McGrath has gone through the various provisions of the Bill, all of which will have a very practical and real impact on people who are in a very challenging position across this country. He has gone to great lengths in the preparation of this Bill to ensure that this is not carte blanche for people who will not pay, as opposed to those who cannot pay. That has been the conundrum all along in the preparation of this legislation and the debate about mortgage debt; we have tried to strike a balance between those two categories. This is a Bill for those who cannot pay, with a method offering a chance to come to an arrangement with those to whom money is owed.

The issue of mortgage and personal debt is a whole-of-life matter, requiring a whole-of-Government response. It requires the entire Oireachtas to come together, leave partisanship aside and produce a speedy and effective response. The response to date has not been urgent enough. When one considers the scale of the decisions of this new Government while this problem remains unresolved, it shows a lack of urgency which we must collectively resolve to address. In this Bill Deputy McGrath has provided a road map to do so.

We should reflect on the gravity of the issue. Figures provided by the Central Bank at the end of August show that in December 2010, one in ten mortgages was "in trouble". In March 2011, three months later, the figure was one in nine and by the end of August the Central Bank identified that one in eight mortgages is, to use its phrase, "in trouble". FLAC has provided a further breakdown of these statistics to put some real-life light on the argument. This amounts to 95,158 mortgages "in trouble", of which 55,763 are in arrears and 39,395 have been restructured. FLAC breaks down the figures further to show that of the approximately 55,700 in arrears, 72% have been in arrears for more than six months, with the average amount of arrears in the category at €21,000 per household.

This relates to mortgage debt around the principal private residence. We do not have that kind of information about other personal debt and we do not have that information with regard to personal loans, credit and store cards, car loans and so-called home improvement loans. We do not have the information on loans between families, parents and children or between siblings. We know we have the highest per capita personal debt in the developed world. We know that one of the drivers of the collapse in our domestic economy is that people lucky enough to be in a position to pay down personal debt are doing so at a rate never before seen. Others are saving money because they are afraid to spend in a way that we need them to in order to create jobs because they do not want to end up in debt.

Those who are €21,000 in arrears with their mortgage are probably many more thousands of euro in debt from other forms of credit which we have referred to. There is not a Deputy who has not dealt with such a situation in his or her constituency clinic or in terms of the queries he or she receives on a daily basis.

The Money Advice and Budgeting Service is at the coalface of this challenge. That organisation does an extraordinary job with limited resources. I welcome the commitment in the Keane report to allocate 100 extra advisers to it. Its comments on the Keane report are relevant. It said "it is counterproductive to address mortgage arrears without simultaneously seeking to manage the issue of personal debt". It also said "any arrangement which separates the matter of personal debt can only work to the detriment of the mortgage holder". When the organisation dealing with this issue on a 24 hours a day seven days a week basis comes up with that contention that shows the reality of the situation and the need for Deputy Michael McGrath's Bill.

I welcome the fact the Government will not oppose the Bill tomorrow night. However, my experience to date is that while it may not formally oppose it, it will file it under the heading "to be done and to be looked at" and that will be the end of it. We have a list of Bills like that. This Bill is incredibly important. It needs to proceed urgently. Deputy Michael McGrath said he is agreeable to discussing amendments to it on Committee Stage. Therefore, there is no reason we cannot get this process quickly under way.

The debt settlement and mortgage resolution office, as proposed by Deputy Michael McGrath, would give a voice to those who are drowning in personal debt. It would act as a trusted broker but, more importantly, it would be an empowered broker, a broker we currently do not have. The broker would be empowered to strike deals between those who owe and those who are owed. That is what we need.

If the proposed office were established, MABS would have an avenue open to it to send people who approach it for whom it cannot reach agreement with creditors. It would be empowering for people to have such an avenue open to them.

Most Deputies at this stage have had experience of dealing with the pressures of personal debt in their constituencies. Earlier this year I dealt with the case of an individual with a €30,000 debt on three credit cards. The spending on the credit cards was not extravagant in terms of expensive holidays or weekends away rather it was payments to Tesco, Lidl or Dunnes Stores. The person because he was self-employed was not in a position to sign on the dole or receive any benefits and for a year and a half had used those three credit cards to live. He had approached the Department of Social Protection for assistance and was turned down and he had approached the various agencies and was also turned down. Thus, the bill had amassed. He did not want to walk away from his debt. He had managed despite his difficulties to pay off the debts of his business but the debt had finally grown to a level where he could no longer live. Luckily we worked with him and got him his various social welfare entitlements and we are still working on the level of the debt with the credit card companies. In fairness to two of the three companies, they were amenable to being dealt with. As Members of the Oireachtas we cannot force either the supported banks, in respect of which we are all working hard, or the non-supported banks to examine the reality of the situation that they, in many instances, created by issuing credit cards, increasing limits without being asked and by not doing basic credit checks which bankers used to do before they offered personal loans and credit cards. That case is only one of a number with which I and, I assume, my 165 colleagues are all struggling to deal. When people with such difficulties come to us they want us to give them some hope and to show them an avenue out of their difficulties. We do that by working with MABS but Deputy Michael McGrath's organisation would have power to strike a deal with those who are willing to do so.

I am glad the Minister, Deputy Shatter is in the Chamber. He has been more active than many of his colleagues in producing legislation on a range of issues. I wonder why the personal insolvency Bill is so far down his list of priorities. He has been good at producing the heads of legislation and bringing them to committee before bringing the Bill to the floor of the House. Is it possible for him to bring the heads of this Bill to committee before Christmas so we can initiate the discussion on what, I gather, he is planning to bring forward in the first quarter of 2012? Even the production of draft heads, which he has produced for some Bills, would allow us to find out his thinking on the issue and allow the committee, which operates on a non-partisan basis, to give some direction to bringing in this important legislation. It would show that as an Oireachtas we are conscious of the pressures people are under and that we are willing to respond.

Deputy Michael McGrath has been careful in producing this legislation. This Bill and debate is not about helping people to walk away from responsibilities for which they have signed up. It is about assisting those in serious difficulties, which many people will not talk about or acknowledge and in respect of which many do not know where to go for assistance. This is affecting every aspect of their lives.

We have just completed Mental Health Awareness Week and last week various bodies at the coalface of dealing with mental health pointed to the impact of the recession as a driver in the increased demand for mental health services during the past 18 months to two years in particular. When one considers the figures given by Free Legal Advice Centres, namely, average mortgage arrears of €21,000, is borne on the shoulders of people around the country in addition to debt not measured — if we could get figures on the levels of personal debt, that would contribute greatly to this discussion — people are under great pressure with that level of debt hanging over their heads on a daily basis. People who have taken pay cuts, have been subject to tax hikes and have suffered business failure through no fault of their own have this personal debt gnawing away at their day to day existence. That cannot continue. That gnawing will put pressure on a health system that is already stretched. We have it within our power as an Oireachtas to act and to do something practical that will assist these people.

I ask the Minister present, Deputy Shatter, and the Minister for Finance, Deputy Noonan, not to file this Bill under any other business. When we leave this Chamber tomorrow night without a division being called on it, I ask the Government not to file it as something that will be done at some point along the way. It needs to be urgently acted on. Such debt is an immediate pressure on people across the country who hear Members proclaiming green shoots are appearing which these people do not see. They are looking for an avenue through which to get assistance and we are providing such an avenue through this legislation. Please accept it and enact it as a matter of urgency.

Deputy Seamus Kirk

I take this opportunity to thank my party colleague, Deputy Michael McGrath, for bringing this Private Members' Bill before the House and affording us the opportunity to speak on the matter.

This Bill is a new step in regard to debt settlement and mortgage resolution. I know from my constituency office and the number of queries and representations on this matter that this Bill is urgently needed. During the boom period many people who bought and built houses now find they are left with a depreciated value on their home and as unemployment increases, more issues in regard to debt repayment problems are coming to the forefront.

I welcome this Bill and it is a step in the right direction. With a collective cross-party approach, we can offer some help to a large number of people in need. We welcome the recommendations of the Law Reform Commission's Report on Personal Debt Management and Debt Enforcement of December 2010. We recommend the creation of an independent statutory office where distressed borrowers are treated fairly and the utmost discretion is shown in each case.

It also important to note that the establishment of a non-judicial debt settlement agency is a key recommendation of the Cooney report on mortgage arrears and the Keane report.

I will describe the principal provisions of the Bill. If debtors are not in a position to meet their personal debt commitments, there will be a process under the newly created debt settlement and mortgage resolution office, DSMRO, to apply for assistance from a licensed personal insolvency trustee to examine their financial affairs in detail and negotiate with their creditors under a debt settlement agreement. A debtor will only be able to enter into a debt settlement arrangement once in a ten year period unless his or her case is determined to be exceptional. A debtor who seeks to enter a debt settlement arrangement will also be able to apply for a protective order to prevent the enforcement of personal debts by creditors or enforcement agencies. If a debtor defaults on the arrangement for six months, the arrangement will be deemed to have failed.

Debtors deemed to be insolvent under the Minister's regulations will be able to obtain a debt relief order which may release them from some or all of their debts and liabilities. However, a debt relief order will not release an insolvent debtor from any secured debt, and a creditor will be able to object to the debtor's participation in the debt relief order process within 12 months by applying to the DSMRO for an investigation.

The Bill will allow a person who holds a mortgage to obtain a mortgage resolution order in respect of a family home mortgage. A mortgage resolution order will only be granted if the financially restricted mortgagee is the owner of the mortgaged property, has resided in the property for two years prior to making the application, provided written confirmation that he or she will not lease or sell the property and had not previously been granted a mortgage resolution order. Once a mortgage resolution order is in place, any financial institution involved in the order will be prevented from initiating legal proceedings against the mortgagee. A financial institution will not be able take any action to secure repayments or seek repossession of a mortgaged property that has been included in a mortgage resolution order.

The debt enforcement office will be responsible for the general oversight and management of debt enforcement procedures carried out by debt enforcement officers, including putting in place an internal mechanism to handle appeals. The Bill will also reform the enforcement mechanisms to be used when handling debtor situations and explicitly emphasises the principle of proportionality, which simply means focusing on the least restrictive mechanism for the specific debtor. The individual enforcement mechanisms discussed in the Bill are instalment orders, attachment of debt orders, attachment of earnings orders, goods seizure orders for seizure and sale of goods and orders to receive and retain money due to debtors from future sale.

The Bill is urgently needed to assist the large number of distressed home owners and should be passed by this Chamber. I urge Members from all parties to support it in order to assist those who are struggling with debts and mortgage repayments. The importance of finding a solution to the problem of distressed mortgages cannot be overemphasised because the problem will have to be addressed before the domestic economy recovers. The House has an opportunity to embrace the Bill as a significant contribution to addressing a critical issue for many in the country.

Minister for Justice and Equality (Deputy Alan Shatter)

I commend Deputy Michael McGrath on bringing forward the Debt Settlement and Mortgage Resolution Office Bill 2011. The Government will not be opposing it on Second Stage because, as I previously pointed out to Deputy Calleary, this is the approach I tend to adopt with constructive proposals when they come before the House. While I thank Deputy Michael McGrath for promoting reform of our insolvency laws and practice, the Government is in the final stages of preparing its own legislation in the form of a personal insolvency Bill which will address the matter in a more coherent and comprehensive fashion, taking into account all the significant issues involved.

There is a commitment in the Government legislative programme published on 14 September to publish a personal insolvency Bill which includes provision for debt settlement arrangements by the end of March 2012. Preparation of that Bill is at an advanced stage. I noted with interest Deputy Calleary's remarks regarding the timeframe. This is the timeframe to which the previous Government agreed in the memorandum of understanding concluded with the troika. It is my objective, if possible, to do better than that timeframe.

Deputy Michael McGrath's Bill has two distinct elements. His proposals in regard to debt settlement and enforcement faithfully reproduce the text of the draft scheme of a Bill contained in the December 2010 report of the Law Reform Commission entitled, Personal Debt Management and Debt Enforcement. His proposals in regard to the debt settlement and mortgage resolution office which would grant mortgage resolution orders appear to be a continuation of the thinking contained in the Private Members' Bill entitled, Family Home Bill 2011, which his party brought forward in the Seanad. That Bill was debated on 27 July.

Let me, first, address the issue of the reform of personal insolvency laws. The recommendations of the Law Reform Commission in regard to reform of bankruptcy law and the creation of new non-judicial debt settlement systems are being taken into consideration in my own proposals and will contribute to shaping the general direction of the reform of our personal insolvency regime. I am sure Deputies will concur when I say we are grateful to the commission for its work in this area, including the consultation process in which it engaged and the consultation paper it produced. The commission also provided an interim report on certain matters and it fell to me as Minister to consider that report.

I am glad to say I was in a position to implement the key recommendations made by the Law Reform Commission. The Civil Law (Miscellaneous Provisions) Act 2011 made a number of important technical improvements to bankruptcy law to benefit the operation of the Office of the Official Assignee in Bankruptcy. More significantly, the Act began the process of reforming the discharge periods applying to bankruptcy. For the first time in our law an adjudication of bankruptcy is now automatically discharged after 12 years. In addition, the period for application to the court for discharge of bankruptcy is reduced from 12 years to five. However, discharge remains subject to the existing conditions: payment in full of all expenses, fees and costs of the bankruptcy and all preferential payments, primarily to the Revenue Commissioners and former employees. The costs and preferential debts involved may amount to large sums. In a significant number of cases the debtor will be unable to meet these amounts at any stage and thus may remain bankrupt for some time. The amendment will, however, give some a chance to recover and begin anew.

The introduction of automatic discharge of bankruptcies on the 12th anniversary of the adjudication order has allowed the Official Assignee in Bankruptcy to bring closure to 365 so-called legacy bankruptcies that were, in effect, clogging up the system. These are bankruptcies which have continued for longer than 12 years and where the persons involved could not satisfy the discharge conditions under the 1988 Act. The new discharge provisions will allow the people concerned to move on with their lives and permit them to fully engage in society without the stigma of bankruptcy. I hope it has brought some peace of mind to those who now stand discharged. These changes to section 85 of the Bankruptcy Act 1988 came into effect on 10 October.

It is also worth mentioning that the official assignee has, by virtue of the introduction of the new law, already managed to recover significant sums in the final resolution of bankruptcies to the benefit of creditors. These recent reforms to bankruptcy law are but the first step in the overall reform of our personal insolvency regime.

I do not propose to enter into a section by section discussion of the Bill but will instead address certain broad themes in regard to insolvency regime reform. The commitment in the programme for Government and the EU-IMF programme of financial support for Ireland is to publish a personal insolvency Bill by the end of March 2012. I have indicated to the House that I will, if possible, publish the Bill before that date. It is planned to furnish a copy of the heads of the Bill, when they are complete, to the Joint Committee on Justice, Defence and Equality for its consideration and comment. That was always my intention and I hope Deputy Calleary will welcome the fact that I am dealing with the matter.

My Department continues to engage in focused consultations with key stakeholders, including the State, financial institutions, legal and financial experts and advocacy groups, to identify, at minimal cost, the optimum new structures for bringing about reform. This necessary consultation, particularly in the context of the exceptional economic situation in which we find ourselves, is greatly assisting the development of detailed legislative proposals. In considering reform of our insolvency law and practice, we might bear in mind a number of general guiding principles. The overall objective is to permit efficient and effective insolvency proceedings while minimising moral hazard. The resolution of significant personal indebtedness should not be punitive or destroy the enterprise and hopes of a person for the future. All debt settlement arrangements of whatever type should operate on the basis of consistency, clarity and certainty and be arrived at on a case by case basis between the debtor and the creditor. There should be an acceptance that there will be implications for financial institutions and other creditors. Losses are likely to accrue through debt modification and write-down in any debt settlement plan. There is a need to develop all types of debt settlement in tandem to ensure coherence. That was recommended in the Keane report. The development of our personal insolvency law, taking into account international best practice, will lessen the opportunity for forum shopping, something we have seen a considerable amount of over the last two years.

The Government strategy, which is based on these principles, will not be found wanting. It will seek to be as humane as possible, consistent with the need to administer a system that achieves a balance of interests, facilitates resolution between parties and provides for adjudication where necessary. Informal or bilateral agreements to manage or settle debt between debtors and a single creditor can play a significant role in specific circumstances. They can often be the most sensible and cost-effective arrangements, particularly where the issue is one of dealing with repayment difficulties for a single major credit, such as a mortgage. Such agreements can involve both secured and unsecured debt. There is some evidence in the case of mortgage repayment difficulties that financial institutions are often slow to initiate or react to contact from debtors, are inflexible and for the most part refuse to contemplate reasonable proposals. I think the House will agree that the banks must improve their game in this regard.

I agree with the proposal in the Deputy's Bill that we should introduce a debt relief order scheme. This is essentially a mechanism to enable people with no assets and no income to write off unsecured debt, such as credit card debt, personal loans or catalogue debt, within a short period. In effect, a debt relief order applicant would not be a property or asset owner and would have very limited available income to service debts. As I envisage it, on approval of the application for a debt relief order, there would be a moratorium of 12 months, for example, during which debts would be frozen. During this time, creditors would not be able to pursue the debtor for the outstanding debt or add further interest on the balances. If, after that period, the debtor still cannot pay the debts back at a reasonable amount each month, they are written off. Each debt relief order would be publicly registered on an insolvency register.

I am not convinced that a person should be entitled to avail of a debt relief order more than once. I am conscious that potential participation in a debt relief order scheme may involve negative incentives, such as fraudulent behaviour, non-acceptance of employment or involvement in the black economy. A critical feature of the scheme that I am developing will be the setting of appropriate levels in relation to the debt ceiling concerned, the value of assets held and the net disposable income available to the person each month after reasonable living expenses. The Law Reform Commission envisages that the Money Advice and Budgeting Service, MABS, could be the main approved intermediary body with the primary processing role for applications for debt relief orders.

I am sure that Deputies will agree that MABS provides a critical service in assisting people who are over-indebted and need help and advice in coping with debt problems. Some 52 independent MABS companies operate local MABS services from 65 locations throughout the country. The MABS national telephone helpline is available from 9 a.m. to 8 p.m. from Monday to Friday. The MABS website can be accessed 24 hours a day. Some 90% of clients presenting to MABS are assisted through the telephone helpline, which provides assisted help to ensure clients take steps to assess and address their situations. Based on the latest information available from the Citizens Information Board, at the end of June 2011, the average national waiting time from point of contact to first appointment with a MABS money adviser is between five and six weeks. During the waiting period, clients are assessed. Those in need of immediate assistance are given priority appointments. Others are provided with assisted self-help to ensure they have taken steps to assess their situations and, if appropriate, are supported to take holding action with their creditors.

To assist the work of MABS, the Government has made funding of approximately €18.3 million available in 2011. The number of new clients presenting to MABS to the end of September 2011 was 17,536. This represents a 3% increase on the number of new clients presenting in the same period in 2010 and a 19% increase on the 2009 figure. Of those who contacted the MABS to the end of September 2011, some 51.6% were aged between 26 and 40; some 40.2% were aged between 41 and 65; some 19% were single and 15.3% single with children; some 58.3% were in receipt of a social welfare payment; some 26.7% were working; some 40% were single income households; some 20.4% were living in private rented accommodation and some 44.7% of new clients were people with mortgages. The total amount owed to creditors by new MABS clients in September 2011, based on the debt they had when they first came to MABS, amounted to €359.2 million. Of that total, 71,6% was owed to banks or financial institutions and 12.2% was owed to credit unions. I agree that MABS should have an important role to play in debt settlement arrangements. The scope of that role, and the question of other options in addition or as an alternative, are under consideration in the relevant Departments. They will be detailed in my legislative proposals to establish those arrangements. The Bill before the House does not have sufficient detail in that regard.

The Deputy's Bill sets out proposals, similar to those recommended as he acknowledged by the Law Reform Commission, for the introduction of a new non-judicial debt settlement arrangement. This would be similar to schemes in the UK and Australia which operate on the basis of a legal agreement between a debtor and two or more creditors to repay an agreed amount of debt over a set period of time. At the satisfactory conclusion of the agreement, normally after five years, all debts covered by it would be discharged. The debt settlement arrangement scheme proposed by the Law Reform Commission and the Deputy would be similar to those in the UK, Australia and New Zealand. It would essentially have regard only to unsecured credit. Secured credit, such as mortgage debt, car loans, student loans and certain taxes, would not be debt settled.

The introduction of such a debt settlement arrangement dealing with unsecured debt only is a valid reform approach in itself. In a typical scenario, a debtor might also have difficulties with the repayment of secured or preferential debt. Such a person is normally exhorted to maintain mortgage repayments as fully as possible at the expense of the unsecured creditors. In such circumstances, little if any money may be available from that person to propose a debt settlement arrangement to the unsecured creditors. These creditors would then have little reason to engage with the debt settlement arrangement process and could resort to other enforcement proceedings.

I am concerned that if we introduce a debt settlement arrangement scheme that does not deal with secured credit in some way, it may overly incline debtors or creditors towards bankruptcy as the most practical application for a full resolution of their position. Deputies may wish to note that in Australia, which has very developed non-judicial debt settlement systems, bankruptcy is the option of choice in approximately 70% of insolvency cases. The Government will make decisions in this area based not only on what the Law Reform Commission recommends, but also on the developing situation in the economy, various economic analyses, the Keane report and different approaches in other relevant jurisdictions.

I wish to speak about the last major element of a personal insolvency regime. I refer to bankruptcy, which is a longstanding judicial process that involves the Office of the Official Assignee in Bankruptcy and the High Court. The Bill proposed by Deputy McGrath makes no mention of the reform of our bankruptcy law. As I have said in this House previously, we must strike a balance within our bankruptcy laws where we do not reward those who trade recklessly and destroy other people's lives, while finding a mechanism to facilitate those who may be able to recover, rebuild their lives and have the possibility of re-engaging in business at some stage. We must safeguard against those who seek to manipulate the system and ensure we have appropriate measures to deal with unco-operative or fraudulent bankrupts.

The reform of bankruptcy law will invariably focus on the length of the discharge period that will apply to the person adjudicated bankrupt. We debated this point in the House during the passage of the Civil Law (Miscellaneous Provisions) Act 2011 in July. Opinions varied as to the appropriate period. There was consensus that the one-year period that applies in the UK and Northern Ireland is too short, but anything beyond five years is too long, particularly if the bankrupt person has been fully compliant and not behaved fraudulently in any way. No final decision has been taken by the Government in this regard. I will be happy to hear the views of Deputies on the matter once more. I invite them to address it further during the course of the debate on this Bill.

It is critical in the case of a bankruptcy that the insolvency trustee — the official assignee or a private trustee — should ensure the speedy realisation of the assets of the bankrupt for the benefit of creditors. Given the potential numbers involved, there could be significant recourse to personal insolvency trustees in addition to the role of the official assignee in bankruptcy. These are considerations to be addressed in legislation. I am conscious that a significant expansion of existing State structures will be required to effect properly the reform of personal insolvency. The Office of the Official Assignee in Bankruptcy, which is part of the Courts Service, has nine staff at present. It deals with a small number of applications and adjudications in bankruptcy each year. Under reformed legislation, the prospective caseload for this office or its replacement will be significant and will require staff and funding. As it stands, the Deputy's Bill is unworkable because it avoids the hard questions of the administrative arrangements, organisation, staffing and funding that will be necessary to operate it. As Minister, I do not have that luxury and I must address the matter comprehensively in my own Bill with the backing of my colleagues in Government, particularly on the finance side.

In so far as those matters are concerned, I am considering the establishment of an Irish insolvency service to be the prime motor and focus of non-judicial debt settlement activity. Insolvency and trustee services have been established in the UK, Northern Ireland, Australia and New Zealand. While the insolvency services in those other states combine the administration of judicial bankruptcy and non-judicial debt settlement, it is a matter for consideration as to whether that would be feasible in our jurisdiction. An insolvency service would require some form of quasi-judicial status. It would determine the applications for the proposed debt relief orders. It would critically maintain and update the registers of all non-judicial debt agreements to ensure compliance and to provide information to potential creditors. I am in consultation with my colleagues in Government and the Attorney General with a view to establishing the best and most economic model for our jurisdiction.

Deputy Michael McGrath's Bill also makes certain proposals in regard to mortgages. He envisages there should be a debt settlement and mortgage resolution office to administer mortgage resolution orders. I have commented on the incomplete nature of the administrative arrangements proposed in the Deputy's Bill. The treatment of mortgage arrears requires careful consideration and needs to be set in the context of all of the potential debt settlement and insolvency measures. My colleague, the Minister for Finance, will set out in detail to the House this week the report of the interdepartmental working group on mortgage arrears, better known as the Keane group. I do not propose, therefore, to go into much detail on the report. It is important to note, however, that the Keane group concluded that those who can pay their mortgages should do so and that blanket debt or negative equity forgiveness is not appropriate. It would be a costly response and an inefficient way to make mortgages more affordable for those experiencing most difficulty.

The report sets out a range of possible solutions, including trade-down mortgages, which could be suitable where owners of higher value or larger properties trade down to a more affordable mortgage; split mortgages, which could be suitable where a household is not currently in a position to meet the commitments of the full mortgage but could meet the commitments on a reduced amount and perhaps repay the remainder over time from income or capital increases; and sale by agreement, where in the event that an alternative solution cannot be reached, the borrower and lender would agree to sell the property and resolve the shortfall in the mortgage in an appropriate and reasonable manner after sale, considering the borrower's circumstances.

The State also has a significant role to play, especially where a person with a distressed mortgage will qualify for social housing support. The group proposes the introduction of two new mortgage-to-rent schemes by the Department of the Environment, Community and Local Government utilising approved housing bodies and leasing to local authorities. The key criterion to qualify in each case is that the person with the distressed mortgage and the person's house both qualify for social housing.

My Department contributed significantly to the work of the Keane group. I acknowledge the considerable effort made by Mr. Declan Keane and the members of the working group in bringing forward their proposals in such a short timeframe. Given the complexity of the problem, theirs was a very challenging task and I am pleased it was possible to come up with a range of solutions which, when implemented, will enhance the possible options available to those in difficulty with their mortgage repayments. I was disappointed to note comments in the media, including by Members of this House, casting aspersions on the bona fides of the members of the group.

I am sure the House would agree with me that we need to be realistic in how we approach this problem. The spectrum of mortgage difficulties which people are experiencing is quite wide, ranging from those who are in temporary difficulty to those at the most severe levels of indebtedness. There is no one-size-fits-all solution, and this is reflected in the recommendations of the working group which are aimed at providing measures which will augment the existing menu of options available.

In so far as my own Department is concerned, the reform of the bankruptcy and personal insolvency regime will play a significant part in how we deal with the problem of personal indebtedness generally. Indeed, this reform was identified by the Keane group as being fundamental in underpinning the range of solutions to the mortgage problem. At the best of times, this is a complex area of the law where a careful calibration is required between the rights of debtors and creditors. The task is perhaps even more difficult when one attempts to introduce such reform during times of severe economic difficulty.

The difficult decisions will be taken by Government in regard to this matter. The economic and financial effects of certain of the new arrangements that are being contemplated are being carefully assessed to ensure all relevant issues are addressed and their impact and economic and social consequences are fully anticipated and understood. Our personal indebtedness problem differs from many other countries in that such a significant proportion of personal indebtedness in Ireland is linked to property ownership. Any new insolvency systems must take this into account in their design.

Deputy Michael McGrath in his proposed Bill also raises the issue of debt enforcement practices and mechanisms. Apart from the well-publicised lists relating to applications for possession orders in regard to property, issues relating to debt come before our courts in several guises. Many involve small creditors, for example, family law maintenance, hire purchase agreements or creditor loans, as well as failure to pay loan repayments to financial institutions. Generally, the courts take the view that, where possible, such disputes are best resolved through mediation between the parties involved, avoiding court intervention unless absolutely necessary. There will inevitably be circumstances where it will be necessary for people to be able to rely on the offices of the State to enforce the terms of a contract. It would be undesirable to rush to legislate to make enforcing these rights more difficult. It would leave Ireland in a most unfavourable light internationally if our law prevented people from exercising and relying on their contractual rights.

The current legislation upholds these rights with specific safeguards. For example, a person cannot be imprisoned merely on the grounds of inability to fulfil a contractual or debt obligation. Committal orders are granted only where a person fails to comply with a court order. The law provides that the judge shall only make a committal order where the debtor shows that the failure to pay was due to his wilful refusal or culpable neglect. This provision is intended to ensure that if a debtor is genuinely unable to meet the repayments under an instalment order, steps can be taken to ensure that such a debtor is not deprived of his or her liberty. A debtor may apply for legal aid or the judge can refer the parties for alternative dispute resolution. Since the introduction of the 2009 amendment to the Enforcement of Court Orders Act, only 162 persons have been imprisoned in regard to a debt matter in 2009 and five in 2010.

It is worth recalling that when a judgment for the payment of money is obtained from a court, the primary method of enforcement of such a judgment is for the judgment creditor to obtain from the court an order directed to the sheriff commanding him to seize goods belonging to the judgment debtor and to produce the sum due out of their sale. It should be borne in mind that the execution of money judgments by a sheriff is only one of a number of methods of enforcing such judgments. These other methods require an application to court and do not come within the scope of sheriff law. These other methods include registration of a judgment mortgage which entitles a creditor to institute proceedings for the sale of the debtor's land; a garnishee order, requiring a person who owes money to the debtor, including a bank, to pay the money involved to the creditor; a charging order, which can make available to the creditor stocks and shares belonging to the debtor; the appointment of a receiver by way of equitable execution, making other assets of the debtor available to the creditor; and an order requiring the debtor to pay his debt by instalments under pain of imprisonment where the failure to pay is, as I said, due to wilful refusal or culpable neglect. The proposals contained in Deputy Michael McGrath's Bill, which are taken from the Law Reform Commission's draft scheme, would involve a significant change in regard to debt enforcement procedures. I am of the opinion that this particular area requires further and careful consideration.

As I said at the beginning of my speech, the Government will, in its own Bill, provide for a comprehensive new framework for settlement and enforcement of debt and for personal insolvency. The Government will not shirk from its own responsibilities in this area and we will develop the legislation as rapidly as possible. As already stated, Deputy McGrath's Bill unfortunately falls substantially short in scope and detail as well as policy. In the spirit of encouraging the fullest possible debate on all options and of encouraging Deputies opposite to produce constructive legislative proposals for this House, the Government is not opposing the Bill which in its own right attempts to establish certain principles in support of necessary reform. In the circumstances, upon the completion of debate on the Bill tomorrow evening, it will pass Second Stage and move on to Committee Stage.

It is anticipated that within a short few weeks the heads of the insolvency Bill under preparation within my Department will come to Cabinet. It is my intention, with Cabinet agreement, to furnish the heads of the Bill to the Joint Committee on Justice, Defence and Equality. As the Bill is further developed by the Attorney General, it would be particularly helpful were the joint committee to receive observations and hold such public hearings as it deemed appropriate on both Deputy Michael McGrath's Bill and the heads of the Government Bill furnished to it.

It is not my intention, contrary to Deputy Calleary's suggestion, that Deputy McGrath's Bill be put into some form of cold storage. It is my intent to ensure that at the end of this process, Members will produce the most comprehensive legislation possible to address all the relevant areas. It is my hope that the Oireachtas joint committee would then produce a report to contribute to the development of the Government Bill and its finalisation by the Parliamentary Counsel. By such approach, Members can ensure they produce the very best legislation in a manner which facilitates a meaningful contribution to its development being made at an early stage by all sides in the House.

I hope the Government's approach to the Bill and to the proposals contained therein will be perceived as genuine and constructive in the manner in which it intends to deal with legislation and Private Members' Bills produced by Deputies on the other side of the House. I hope Members will be able to work together across the Chamber to produce the best possible legislation to address the very real needs and difficulties that so many thousands of people in this State are in as a consequence of the economic tsunami with which we have been hit, the fiscal difficulties that have occurred, the dreadful negative equity in which so many people find themselves and the difficulties that many are experiencing in making mortgage repayments due to job losses.

While I do not wish to be uncharitable in any way in respect of this legislation, it is appropriate that Members are addressing this issue. Perhaps it is appropriate the Deputies opposite produced this Bill, the present Government having inherited the worst fiscal and economic legacy——

Deputy Dara Calleary

The Minister managed nearly 15 minutes without mentioning it.

Deputy Alan Shatter

——of any Government in the history of this State as a consequence of the abject failure of its predecessors in Government.

Deputy Dara Calleary

He could not resist.

Deputy Alan Shatter

It is only right that members of the party that previously dominated Government in this State for 14 years seek to make a contribution to assist the Government in resolving the appalling difficulties confronting so many people, which are causing enormous pain and hardship both to them and to their families.

Deputy Dara Calleary

He nearly got there.

Deputy Dessie Ellis

The problem posed by distressed mortgages cannot be overplayed. It is one of the biggest challenges facing the Government and the solution is neither easy nor simple. As someone who, in common with most Members, is deeply troubled by the problems facing thousands of people in this State, I must consider the Bill before the House and judge it on its own merits. That said, it is difficult to not perceive this Bill as an attempt by the party responsible for the problem to try to look like the good guys. This is the party which, for two or three years, did nothing about the problem its members helped to create. Doing nothing, given the nature of distressed mortgages, is a wholly negative contribution. I cannot get past how much we might have saved or how much hardship, worry and struggle for ordinary families might have been avoided, had Fianna Fáil, now clasping what its members claim to be a solution, actually done a single meaningful thing while on the other side of this Chamber to bring about solutions for distressed mortgage holders.

Deputy Michael McGrath

A lot was done.

Deputy Dessie Ellis

We might then be in a much better position than that in which we now find ourselves, on the day Members are debating the utterly unhelpful Keane report, which gives people no hope for the present. It is important to recognise these facts and that Fianna Fáil is not allowed to forget its culpability and inaction. I strongly believe that unless its members were reminded of this fact, this evident move in its position would not have taken place.

While these proposals do not amount to a panacea, it is a step in the right direction towards debt restructuring and mortgage resolution. I commend those who put it together because it is a sign that even those on the right are waking up to the realities that the old methods of dealing with the banks and hoping for a solution are set for failure. The policy of giving billions and getting nothing in return has failed and failed badly. It appears as though there is agreement that many are coming around to what Sinn Féin has been saying all along. Throughout the lifetimes of the last Government and the present Fine Gael-Labour Party coalition, Sinn Féin has argued in favour of supporting those who can manage a restructured sustainable debt, as well as the formation of a body which would, on a case-by-case basis, offer solutions to distressed mortgage holders. I hope this motion constitutes the beginning of some form of consensus on how distressed mortgages and debt resolution must be approached. The 95,000 people who are either 90 days in arrears or who have restructured their mortgages deserve Members' efforts beyond political point-scoring. I am happy to support this Bill. There must now be movement towards the development of a legislative debt resolution process that can enforce its decisions and offer real change to this drastic and growing problem.

Deputy Pearse Doherty

As I noted in my remarks during the debate on the Keane report earlier, Sinn Féin believes there is an urgent need for the Government to act and put in place a comprehensive mechanism for addressing the root causes of mortgage distress. Everyone within this Chamber and further afield is aware of the 100,000 homeowners in serious mortgage distress and of the many more who are at risk of distress. The costs of inaction will be devastating for the economy, for society and for those ordinary citizens. Of course we have not just learnt about this mortgage crisis today, yesterday, last month or when the Keane commission was set up two months ago. We have known it has been spiralling out of control for some time, as far back as 2009. It is part of an unravelling of the housing bubble generated by that toxic mix of Fianna Fáil policy that incentivised reckless bankers and greedy developers to feed a housing bubble, irrespective of the social, economic or environmental costs. Moreover, as is so often the case with Fianna Fáil policy while in office during the previous Administration, the ordinary men and women are those who suffer.

Each day, tens of thousands of families are faced with a stark choice of whether to pay their mortgage or feed their children, which is a choice foisted on them by a bad Fianna Fáil Government. This mortgage crisis is one of the many toxic legacies of the previous Government. I recall sitting in the Seanad Chamber at the height of the property boom, when the then Leader of that Chamber, former Senator Donie Cassidy, a long-standing member of the Fianna Fáil Parliamentary Party, stared the cameras in the face and imparted his wisdom to the young generation of Ireland by telling them to go out and buy houses. These are the people who may have followed the advice of Donie Cassidy and other Ministers to buy, at a time when the Taoiseach stated there would be a soft landing. They are now being penalised. Members today are trying to pick up the pieces in this regard.

In response to the growing crisis the previous Government convened an expert group on mortgage arrears and personal debt. The group produced two reports in July and November 2010 that included a total of 62 recommendations, many of which would provide short-term relief to those in mortgage distress. However the expert group fell far short of providing a comprehensive solution to the underlying problems of unsustainable debt and falling incomes. In the main, its recommendations were focused on better regulating the relationship between the mortgage provider and lender and providing short-term forbearance measures such as a deferred interest scheme. Moreover, despite the production of the aforementioned interim and final reports, the previous Administration brought forward no legislation in 2010. It basically ignored the recommendations, which subsequently had no impact.

It is ironic that having created the mortgage crisis during the boom and then having stood idly by as tens of thousands of home owners fell into mortgage distress in 2009 and 2010, Fianna Fáil now stands before Members offering solutions to its own mess. It is also interesting to see how the policy has evolved.

In common with my colleague who preceded me, I welcome the proposal before Members. In July, Fianna Fáil published the Family Home Bill and proposals for the reform of mortgage interest supplement. These proposals were little more than a repeat of elements of the expert group's recommendations and focused on short-term measures. Significantly, the Fianna Fáil Family Home Bill only dealt with those cases in which the mortgage provider is seeking repossession which, as indicated by the figures from the Financial Regulator, is a tiny fraction of those currently in mortgage distress. Importantly the mechanism for dealing with these cases was the courts — that was the mechanism proposed.

At the time Sinn Féin strongly argued for a radical approach to address this growing problem. We consistently made the case for targeted debt restructuring, focusing on the use of debt-for-equity swaps, backed up by an independent distressed mortgage resolution board. I welcome that Deputy Michael McGrath's Bill, into which he has obviously put considerable time, has included those recommendations, including an independent board with debt for equity as one of the solutions.

In addition to a strengthened distressed mortgage resolution process and statutory code of conduct for mortgage lenders, Sinn Féin argued than the independent board must have the legal powers to enforce resolution orders and penalise lenders for failing to act in an appropriate manner. So I am pleased to see that finally Fianna Fáil has accepted the strength of those arguments. However the 100,000 distressed mortgage holders across the country will today rightly ask why Fianna Fáil did not adopt these policies when in government. Meanwhile Fine Gael and Labour, in what can only be described as a surreal role reversal, are now adopting from the Government benches the minimalist approach of their Fianna Fáil predecessors. Having promised so much when in opposition, they are now doing little about it.

We have consistently argued for a comprehensive solution to this crisis. Four key principles underlie our proposals: maintaining the family home, providing appropriate alternatives ensuring debt sustainability and sharing the burden fairly. These four principles provide the basis for a solution to the causes of the mortgage crisis that is fair and sustainable for borrowers, lenders and the taxpayer. Underpinning these principles must be the objective of debt sustainability. The ability of the mortgage holder to service any new mortgage arrangement must be clearly demonstrated. Crucially mortgage lenders must absorb a significant portion of the losses on the value of the mortgage. This can best be achieved through targeted debt restructuring to reduce the debt burden on the household. In exchange lenders would receive an equity share in the property.

We do not believe the taxpayer should foot the bill for the mortgage crisis, nor do we believe in blanket debt forgiveness. However, a solution cannot be found that does not involve banks shouldering their share of the burden. There is sufficient capital in the banks to absorb a significant proportion of these losses. On the day the PCAR results were announced, I stood in this Chamber and said the Government had addressed the issue of the banks by shoving money into them and filling the black hole, but it then needed to deal with the issue of the mortgage holders. However, that crisis was not given the same urgency by the Government as was the issue of resolving the bank crisis. It is unfortunate that we give greater value to financial institutions than the financial, economic and social well being of our citizens.

It is time to act collectively. We need to articulate here why so many people got into this position. Anger is being vented across communities in different forms. When one goes up the long lanes to visit the elderly woman or the young couple, they show their anger at how the previous Government led them into this situation.

I welcome the Bill before us and I agree with many of its underlying sentiments, with respect to its general debt settlement and mortgage resolution proposals. It is clear that there is a growing consensus emerging for a more comprehensive solution to the mortgage crisis than that contained in the Keane report. No one party has all the solutions but we must all play our part in resolving this crisis.

On that basis Sinn Féin will support the Debt Settlement and Mortgage Resolution Office Bill. We urgently need legislation to be passed in this House offering a comprehensive solution to the 100,000 families in mortgage distress. The time for pushing this problem down the road in the hope that something will turn up is over. Addressing the mortgage crisis demands debt restructuring. This can only be enforced by a strong independent distressed mortgage resolution process, empowered with a range of solutions including debt-for-equity swaps which will force the banks to absorb their fair share of the losses. This is the position Sinn Féin has continually argued throughout this period. It is the position I put to the Financial Regulator, Mr. Matthew Elderfield, and the Governor of the Central Bank, Professor Patrick Honohan. It is the position we continually put to Government. I am glad to see it forms a central part of Deputy Michael McGrath's Bill. I am aware that the Government will not obstruct the passage of the Bill. More importantly we need to stop playing clever games; we need to get it into Committee to tease out its details, strengthen it where it needs to be strengthened, delete the bits that need to be deleted and get it passed. The Government should not just allow the Bill to pass Second Stage and then park it in some committee. Let us deal with the problem together. Sinn Féin, Labour, Fine Gael, Fianna Fáil and the Independents should work collectively to get this problem solved. There is a great demand to get this resolved from the many people in mortgage distress and those other people who are creeping into mortgage distress every day.

Deputy Joan Collins

Before I comment on the Bill, further to what Deputy Doherty said, I must state that Fianna Fáil played a major role in the debt crisis and the mortgage crisis affecting so many of our citizens. It played a major role in the inflation of the property bubble, pushing the cost of basic housing needs beyond affordability for ordinary people particularly in the years from 2003 to 2007 when house prices became false prices in a false economy. This was accompanied by the effective ending of the construction of social housing, again a policy of the previous Government. People were forced into huge mortgages and now find themselves in huge negative equity. The human, family and social cost of this negative equity is having a great impact on our communities. Fianna Fáil was also responsible for the economic collapse which has seen so many people lose their jobs and so many small businesses go under. This is why we have a debt crisis.

That said, there is urgent need for legislation on bankruptcy and debt resolution. Eight months since the formation of the new Government we are still discussing that and still waiting for the heads of the Bill. I was glad to hear the Minister, Deputy Shatter, say he was moving on that and it cannot come soon enough for many people. I have been representing a young man with a young family whose small business got into difficulty and he lost his home. He also lost his business and is now bankrupt owing to having received extremely poor legal advice. He faces the next 12 years on the dole, claiming rent allowance and unable to hold a bank account. Any earnings over €300 must be forfeited to his creditors. He is effectively frozen out of society and frozen out of the economy.

Resolution of this problem is the responsibility of the Government. We must introduce legislation urgently and there are good ideas in this Bill. The 12-year bankruptcy period is brutal — and it can even go beyond that. Five years is not good enough and we should introduce legislation to reduce the bankruptcy period to three years. We must allow people such as this young man from a working class background to get his life back together and earn a living for his family and have a future.

The Bill does not go far enough in addressing the general insolvency and mortgage issues, and does not even deal with the tip of the iceberg. We need legislation, not guidelines, to keep people who are engaging with lenders in their homes. This means a ban on repossession and eviction in these circumstances. We need independent assessors to assess ability to pay, with a cap of 35% on net income and the power to enforce payment arrangements with lenders on that basis. We also need a write-down of negative equity — there is no way around this. A man, with whom I would generally not agree politically, President Bill Clinton, made a very important point at the Global Irish Economic Forum. He understands the nature of capitalism and understands that unless this economy is freed from debt and the mortgage crisis is off our back, we will not come out of this recession. Unless the crisis is dealt with, we will have no growth in our economy and we will not move forward.

The banks have already been recapitalised by €10 billion, following the stress tests. Up to €14 billion will be needed to remove households from negative equity mortgages. If we take out trophy houses and buy-to-let mortgages and service the negative equity in ordinary homes and small apartments, that would cost €7-8 billion. We should look at that figure when trying to remove negative equity from ordinary people who bought houses at false prices in a false economy. We cannot tiptoe around this issue. We cannot protect the bankers. We cannot allow them to keep making profit out of people's misery and indebtedness, and we must stop this madness in the economy at the moment.

The Keane report was produced by six bankers, one of whom is an accountant, and 16 top civil servants. Not one of them is in negative equity. Not one of them is facing the crisis that ordinary people are facing, many of whom are sitting behind closed doors, pushing the world away, and when the post arrives, they sit down and look at the letter for two hours. I have spoken to people in this situation and I am sure the Minister has done so too. His community is not immune to people who are facing this kind of crisis. They have a big monkey on their back. They think they are responsible, but they are not responsible. The banks are responsible, as are the brokers.

I will not oppose this Bill on Second Stage. There should be more debate on it, but we need a quick resolution for people who are desperately waiting for an outcome to their situation.

Debate adjourned.