Vol. 781 No. 1
I move amendment No. 1:
In page 10, between lines 10 and 11, to insert the following:
" "bankruptcy" shall be construed in accordance with the Bankruptcy Act 1988;".
This amendment adds the definition of "bankruptcy" to section 2. I am advised that this is necessary for the purposes of interpretation as the term is used in a number of instances throughout the Bill. It is effectively a technical amendment.
Amendments Nos. 2 to 6, inclusive, in the name of Deputy Niall Collins, are out of order because they involve a potential charge on the Revenue.
May I comment on these amendments?
The Deputy may make a very brief comment. No debate is allowed on amendments that are deemed out of order.
Thank you, Chairman. This legislation allows for the establishment of a personal insolvency regime which will, possibly alone along among all State-backed schemes, include no independent appeals function. It is weaker for this omission which means that where a creditor refuses a debtor's request to come to an arrangement, the latter has no resort. Where an application for a medical card, social welfare benefit or planning permission, for example, is refused, an independent appeals mechanism is in place. The excuse being offered for the exclusion of these amendments, that they involve a potential charge on the Exchequer, does not stand up.
The Deputy is out of order.
I am anxious to make that point for the record.
Thank you, Deputy. We must proceed with the other amendments.
I move amendment No. 7:
In page 24, to delete lines 22 and 23 and substitute the following:
" "debt", in relation to a debtor, means a debt for a liquidated sum that, on the application date, is payable either immediately or at some certain future time within 3 years from that date;".
This proposal amends the definition of "debt" in Chapter 3 to limit the foreseeability of future liquidated sums to the three-year look-forward test provided for in the debt relief notice. Again, this is essentially a technical amendment.
I move amendment No. 8:
In page 25, line 32, to delete "section 43," and substitute "sections 32(11) and 43,".
This is a technical amendment to include a cross-reference to section 33(11).
I move amendment No. 9:
In page 25, line 38, to delete "or has been".
This amendment improves on the existing construction of the text of section 23 by making clear that "specified debtor" means the person who is currently the subject of a debt relief notice. The reference to "or has been" is not appropriate in this context and is proposed for deletion. In common with a significant number of the proposals I am bringing forward, this is a tidying-up amendment.
Amendments Nos. 10 and 11 are alternates and may be discussed together.
I move amendment No. 10:
In page 26, line 8, to delete "€20,000" and substitute "€30,000".
The rationale for this amendment is quite straightforward, namely, to broaden the criteria in regard to the debt relief notice. Specifically, organisations such as the Free Legal Advice Centres have recommended that the applicable debt limit be increased to €30,000, as we propose here. As it stands, people who are fundamentally insolvent and with debts of between €20,000 and €30,000 will be forced to apply for a debt settlement arrangement. Such applications are likely to be rejected by way of creditor veto because the debtors concerned will have very little positive influence in terms of assets and so on to offer.
We discussed this issue on Committee Stage. We remain of the view that the €20,000 limit is too low and are seeking, in amendment No. 11, to increase it to €50,000. When one adds up all of the small liabilities that a person might have, including credit card debt, car loans, credit union loans and so on, in the majority of cases they will come to an amount potentially far in excess of €20,000. Rather than pushing people into the next category of debt resettlement, we should seek to deal with as many as possible under the first step in the process.
The €20,000 ceiling is the level at which debtors will move from a debt relief notice to a debt settlement arrangement. Has an analysis been done of the numbers who would become eligible for the former were the limit to be raised to either €30,000 or €50,000?
Amendments Nos. 10 and 11 seek to raise the limit for the aggregate of qualifying debt under a debt relief notice from €20,000 to either €30,000 or €50,000. I accept that these proposals are well intentioned, but they fail, unfortunately, to recognise the nature of a debt relief notice. The latter is designed to assist debtors with essentially no income or assets and with a level of qualifying debt up to €20,000.
This is a substantial level of debt to be forgiven. It is effectively debt forgiveness aimed at writing off a substantial amount of money. The sum of €20,000 is a substantial amount of money.
The proposed measure provides a non-judicial, low-cost solution to the debt problems of persons who have minimal assets and minimal income. It seeks to offer these people relief from what may be crushing debt burdens, as well as providing them with real hope for the future and encouraging full participation by them in the economy. It seeks effectively to provide an alternative to a judicial bankruptcy for people with a certain level of unsecured debt. As Deputy Mac Lochlainn rightly points out, it is at a level whereby one does not need to resort to one of the other debt resolution proposals that we have, particularly the debt settlement arrangement which he mentioned.
It is important that we fix the qualifying debt level at a figure which meets the genuine needs of individuals but does not encourage people to engage in abuse when money is genuinely owed to creditors. In this debate we have to remember that creditors can be ordinary people who are also trying to meet their financial obligations, while struggling to keep their families together, and are in difficulty because debtors owe them money for simple, basic services they have provided. So the measure is designed to ensure that there is some degree of balance in this area and not to encourage people to incur debt to the disadvantage of others in circumstances where they believe they will simply get a large amount of debt written off.
I have cited examples previously whereby the debt could involve a local shop that is owed a couple of thousand euro, or a local credit union that might be owed €4,000 or €5,000. We must ensure that we do not create a system that encourages people to build up substantial debt. Sums such as €30,000, €40,000 or €50,000 are substantial so we cannot encourage people to build up such debts with the expectation that all they have to do is establish that they do not have the money and it will simply be written off.
We all know there are people who have incurred debts of €10,000 or €15,000 and MABS has been dealing with them. They always intended to pay off their debts but their personal financial circumstances have been unexpectedly impacted upon by circumstances. During the course of the great economic difficulties we have had over the last four years, individuals who believed themselves to be in secure employment suddenly found themselves unemployed. Some individuals - such as a local painter, electrician or plumber - may have done work for others, perhaps assisting people in renovating homes. They may be owed money after doing many weeks of work but suddenly discover they cannot get paid. This is happening to a far greater extent than has ever been the case. We cannot, however, encourage people to incur massive debts or, by refusing payment, leave high and dry those who in good faith have provided products and services.
We considered, therefore, that an upper level was appropriate to the debt relief notice. As I said on Second and Committee Stages, what we have proposed is higher than the equivalent in Northern Ireland and Britain. In the UK, a similar process provides for an upper debt limit of £15,000 which is less than €20,000 at today's conversion rate. However, it is not just a case of being generous in this context, in so far as we have provided for a sum of €20,000 which is a little bit more than the UK equivalent. It is also trying to make a practical judgment as to what the appropriate levels are. No unique judgment can be made in this regard. As we have gone through this legislation, I have said that in this area there is no monopoly of wisdom, so a judgment has to be made. We believe that €20,000 - as the debt qualification eligibility for falling within the mechanism of the debt relief notice - is a balanced and reasonable sum that delimits individuals from thinking they can head down the route of spending €30,000, €40,000 or €50,000 and then get it written off. It provides a simple mechanism for people with very limited income and assets. It is also in line with the type of arrangements that MABS has been able to organise for individuals without the legislation being in existence. In my experience, a MABS arrangement normally - except in exceptional circumstances - involves some levels of repayment taking place.
I understand the arguments that have been made and I am conscious of what FLAC has said about this matter. However, we consider that the €20,000 limit is the appropriate one. Deputy Donnelly asked if we could gauge how many additional people might be covered if we went from €20,000 to €30,000. It would be an absolute guesstimate. I do not think that any of us in this House can, hand on heart, say for sure that we know the answer to that. However, we must also look at the experience of neighbouring jurisdictions. I think it is reasonable to set it at €20,000. The sum of €50,000 would be far too high. I understand the argument that FLAC is making but our judgment is that this is a fair proposal. It gives the possibility of debt write-off to people of limited income and assets. In certain circumstances it may have a detrimental impact on creditors but the impact is not as great as it would be if, for example, the limit was €30,000 or €40,000. When we get into those limits it is reasonable that the debt settlement arrangement is available. If individuals are in a position to be able to make some contribution to discharge their debts over a period, it is quite reasonable to use the debt settlement arrangement rather than expecting to enter into an arrangement where one has incurred that level of debt and one is substantially guaranteed debt forgiveness, unless there is a dramatic change in one's circumstances during the period of the debt relief notice. In the latter case, matters may be readjusted at one's own request so that one pays off some portion of money to creditors and exits one's circumstances. We think, however, that this is a reasonable level to pitch it at, and I hope the House will support that.
I wish to seek clarification on this limit of €20,000. We will probably have the same discussion when we come to the limit of €3 million for personal insolvency arrangements. Apart from MABS and the experience in the North of Ireland, what else has informed the Minister's thinking in arriving at the figure of €20,000? That is what we are trying to elicit. It would be helpful if we knew what had informed the Minister in arriving at that figure. It is fine to compare this jurisdiction with the North of Ireland but the level of personal indebtedness there is not the same as it is here. The critical mass of people who find themselves smothered with personal debt issues is not the same there either. Apart from what MABS is saying and what is happening in the other jurisdiction, what other analysis or thinking informed the figure of €20,000?
I am conscious that we are on Report Stage.
I do not know how many times we can go back and forth on this question. We took the view that the proposal contained in the Bill is a balanced one, having regard to the need to assist people in debt and having regard to the real circumstances of creditors. We must ensure that we do not provide an incentive to individuals to run up large debts from which they believe they can then extricate themselves to the detriment of creditors who have acted in good faith by providing goods and services, or simply with money from the local credit union. I ask the Deputy to consider, for example, if the debt of €20,000 was owed to a credit union. We must be careful about this. Is the Deputy suggesting that we should allow people to borrow €50,000 from credit unions around the country and simply have that wiped out? Has the Deputy given any consideration to what impact that might have on the solvency of credit unions and their capacity to provide funding to others who wish to borrow and who in good faith intend to repay? At some stage one must make a judgment and our judgment was that €20,000 was an appropriate figure, bearing in mind the types of debt to which this could relate. It is relevant that in a neighbouring jurisdiction they have had the experience of a similar mechanism running for some time.
My Department and I considered that situation and how it was working. Based on that, we took the view that we should go a little higher than the British limit. I do not have to hand the exact figures in today's currency but my recollection is that £15,000 would have been just under €18,000. I do not know what the equivalent is if one uses today's exchange rate, as I have not looked. However, we took the view that bringing it up to €20,000 was reasonable but that taking it beyond that would create an incentive that would give rise to difficulties and could give rise to unintended consequences for credit unions throughout the country.
