Bankruptcy (Amendment) Bill 2015: Second Stage

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

I am very pleased to introduce the Bankruptcy (Amendment) Bill to the House today and I look forward to hearing Deputies' contributions. I would like to begin by highlighting the main objectives of this Bill. First, it provides for several key changes to bankruptcy law in Ireland. These are that the normal duration of bankruptcy is reduced from three years to one year; the normal duration of a bankruptcy payment order, which concerns the payments a court may direct the bankrupt person to make towards his or her creditors, is reduced from five to three years; and a bankrupt person's legal interest in his or her home will revest in him or her after three years, subject to certain exceptions. These significant changes will ease the impact of bankruptcy on the large majority of bankruptcy cases who did not seek to go bankrupt and who have co-operated in an open manner with the bankruptcy process and handed over income and assets towards repayment of debts. In such a situation, the bankrupt person will be able to exit bankruptcy and return to normal economic activity much more quickly in line with the position in England, Wales or Northern Ireland.

Second, the Bill provides for significant sanctions to deter and penalise any bankrupt person who do not co-operate with the bankruptcy or who tries to conceal his or her income or assets from creditors. In such cases, the High Court will retain the power to extend the bankruptcy term to up to eight years and to extend the duration of a bankruptcy payment order to up to five years. In addition, a new provision will allow the High Court to extend the bankruptcy term to up to 15 years where it is satisfied that there has been particularly serious non-co-operation or concealment.

Third, the Bill modernises key aspects of bankruptcy procedures. It will abolish the outdated requirement for a statutory sitting of the court in all bankruptcy cases, provide an effective power for the official assignee to disclaim onerous properties and ensure that the official assignee has clear powers to demand and investigate electronic records relating to a bankrupt's assets and affairs. While these changes are procedural, they are nevertheless vital as they will remove unnecessary costs and delays, free up court time and resources and allow more efficient and effective bankruptcy administration. Fourth, the Bill sets out appropriate transitional arrangements so that people already in bankruptcy will also be able to avail of these reforms subject at maximum to a six-month transitional period.

Before I set out the Bill's provisions in more detail, I would like to note that the overall thinking behind the Bill has been influenced in particular by the Private Members' Bill on reducing the bankruptcy term to one year sponsored by Deputy Penrose, which was published in March this year and whose provisions have been incorporated into this Bill, and by the report on bankruptcy reform completed last summer at my request by the Joint Oireachtas Committee on Justice, Defence and Equality chaired by Deputy Stanton. I thank him for the work done by him and members of the committee. The joint committee held a public consultation and examined more than 100 submissions before providing me with its report in July which likewise recommended reducing the bankruptcy term to one year. I thank Deputy Penrose for his interest and work on this matter and once again express my appreciation to the joint committee for its detailed work and to the Joint Oireachtas Committee on Finance, Public Expenditure and Reform and the many stakeholders and individuals who made very valuable submissions.

I think Deputies will agree that this Bill represents an important milestone. It comes at the right time as it complements the significant reforms that we have already introduced since 2012, including the enactment earlier this year of the Personal Insolvency (Amendment) Act and the commencement in recent weeks of the new independent court review of the so-called "bank veto", that is, where creditors reject a personal insolvency proposal. Other recent developments include the waiver of court and Insolvency Service of Ireland fees for insolvency cases, a substantial reduction in bankruptcy costs and the putting in place of a nationwide network of dedicated mortgage arrears Money Advice & Budgeting Service centres, including provision of information and support at all repossession hearings. This is happening at all repossession hearings and I urge people to avail of those services.

I will now turn to outlining the thematic provisions of this Bill. Under the Bill, the normal duration of bankruptcy will be reduced from three years to one year, as recommended by the joint committee in its report. This will also correspond to the position in England, Wales and Northern Ireland. The report of the joint committee expressed concern that reducing the bankruptcy term should not benefit bankruptcies which appeared to be deliberate or fraudulent. The Bill responds to that concern by retaining provision for a considerably longer bankruptcy term - up to eight years and, in particularly serious cases, up to 15 years - where the court is satisfied that the bankrupt is not co-operating with the bankruptcy or has tried to conceal assets or income.

Bankruptcy payment orders are court orders made on the application of the official assignee which require a bankrupt to make payments for the benefit of his or her creditors from any surplus income or assets after reasonable living expenses for the bankrupt and any dependants. The Bill will reduce the normal maximum duration of a bankruptcy payment order from five to three years. However, the maximum five-year duration will still apply in cases where the court is satisfied that the bankrupt has not co-operated with the bankruptcy or has tried to conceal assets or income.

When a person becomes bankrupt, his or her interest in any property he or she owns, including his or her home, passes automatically to the official assignee whose duty is to sell it, if feasible, to repay his or her creditors. Section 61 of the Bankruptcy Act protects any spouse or civil partner of the bankrupt by requiring the official assignee to apply to court for leave to sell the home if it is a family home under the Family Home Protection Act 1976 or a shared home under the Civil Partnership Act 2010. The official assignee will try to dispose of the bankrupt's interest in the property, preferably to the spouse or civil partner. However, in many cases and particularly where the property is in negative equity, no purchaser can be found. The Bill proposes a practical solution in such cases by providing that the bankrupt's interest in the home will automatically revest in him or her three years after the bankruptcy adjudication unless the court orders otherwise, the bankrupt and the official assignee agree otherwise or the official assignee has sold it or applied for a court order authorising sale before that date.

A similar provision already applies in England and Wales. This applies to the bankrupt's home at the date of bankruptcy adjudication, whether it is the family home, shared civil partnership home or principal private residence as a single person. This will also allow for more efficient and cost-effective administration of bankruptcy cases, particularly those with very limited resources. It is important to note that the bankrupt's interest in the home remains subject to any mortgage so the position of the mortgage lender is not affected.

The Bill introduces a new power for the court to extend the bankruptcy term up to a total of 15 years on application by the official assignee where the court considers it just to do so in cases of particularly serious non-co-operation or concealment by the bankrupt. The reason is that a relatively small number of bankruptcy cases feature particularly serious and flagrant levels of such conduct by the bankrupt, for which there is currently no adequate deterrent.

The new 15-year maximum term is modelled on the approach in the US and UK. In the US, a bankrupt's debts are only discharged if he or she has co-operated with the bankruptcy trustee, equivalent to our official assignee. In the UK, legislation allows the bankrupt to remain subject to continuing bankruptcy restrictions for up to 15 years in case of non-cooperation, a "bankruptcy restriction order".

The Bill will abolish the requirement under the Bankruptcy Act to hold a "statutory sitting" of the court in every bankruptcy case, some weeks after adjudication, which must be attended by the bankrupt, the creditors and the official assignee. The original purposes of the statutory sitting are now superseded and it is widely seen as an outdated formality which creates unnecessary legal costs and workload for debtors, creditors and the official assignee, and is a major strain on court bankruptcy resources. Its abolition will free up considerable time for the courts and the official assignee and will also benefit the parties.

The Bill will clarify the wording of several provisions in the Bankruptcy Act to put it beyond doubt that electronic as well as paper records are covered by the powers of the court or the official assignee to demand accounts and records for the purposes of investigating a bankrupt's affairs. This arises in only a few high-asset cases but is important to assist the official assignee in investigations where a bankrupt may have concealed assets.

The Bill will allow the official assignee an effective power to refuse to accept responsibility for any property of the bankrupt which is likely to generate substantial costs and where there are no funds in the bankruptcy estate to cover these costs. This is an important provision. When the official assignee takes over a bankrupt's property, he becomes legally responsible for any costs and liabilities arising from it. These may include unpaid rates, property tax, management charges, essential repairs, ongoing security and insurance of properties which may not be generating any revenue. At the same time, the official assignee has no power to compel any contribution from the secured lender who is entitled to receive any proceeds of sale of the properties. Consequently, these costs risk being imposed on the State and the taxpayer.

The current provision for disclaimer in the Bankruptcy Act effectively only applies to liabilities arising under a lease, which does not cover the many sorts of liability I have mentioned. In the UK this problem has been addressed by the Insolvency Act 1986, which gives the official assignee a broad power to disclaim any onerous property, meaning that such costs are, more appropriately, the responsibility of the secured creditor who will receive the benefit of the property concerned. The proposed amendment in this Bill follows the same approach and will generate considerable savings for the State and the taxpayer as well as improving the efficiency of bankruptcy administration.

Any bankruptcy already existing when the Bill comes into effect will also benefit from the changes introduced by this Bill subject to a six-month transitional period. This reflects the six month transition period provided previously when the bankruptcy term was reduced from 12 years to three years by the Personal Insolvency Act 2012. It is needed to ensure sufficient time is available to ensure a smooth transition and to make any necessary applications to court for extension of time in cases which raise possible issues of non-cooperation or attempted concealment.

Under the transitional provisions, and assuming that there are no grounds for extension, an existing bankruptcy, which was due to terminate three years after adjudication, if it is already due to terminate less than six months after the commencement date, will terminate on its due date, otherwise it will now terminate one year after adjudication or six months after commencement if that is the later date; an existing bankruptcy payment order which was due to expire five years after it was made by the court, if it is already due to expire less than six months after the commencement date, will terminate on its due date, otherwise it will now expire three years after it was made or six months after commencement if that is a later date.

The provision for revesting of the bankrupt's interest in the family home applies to a bankruptcy which exists at the date the Bill comes into effect. Revesting takes place, subject to the usual exceptions, either on the third anniversary of adjudication or six months after the commencement date, whichever is the later.

The technical content and effect of each section in the Bill is set out in the Explanatory Memorandum. Sections 3 to 5 deal with the "statutory sitting", and sections 6 and 7 relate to electronic records as I have explained. Section 8 is an important provision, which amends section 56 of the Bankruptcy Act to ensure that the official assignee has a strong and effective power to disclaim property of a bankrupt which is subject to costly liabilities. Section 9 deals with issues regarding the family home. Section 10 is another important provision which amends section 85 of the Bankruptcy Act 1988 to provide for two of the main purposes of the Bill, reduction of the bankruptcy term and revesting of the bankrupt person's home. Subsection 10(a) reduces the normal duration of bankruptcy from three years to one year and provides transitional arrangements for bankruptcies already in existence at the commencement of this section. Subsection 10(b) concerns the revesting. Section 85(3F) is a transitional provision which I have detailed. Section 11 deals with the extension of time when somebody does not co-operate. Section 12 reduces the normal duration of a bankruptcy payment order. Electronic records are also dealt with in section 15.

In conclusion the background of our economic crisis means that many of those now entering bankruptcy, or already in bankruptcy, have been struggling with intractable debt for several years. The measures in this Bill will give people in serious debt who have no disposable income an earlier return to normal economic activity. As the Small Firms Association has underlined they will particularly help small entrepreneurs. At the same time the Bill includes strong provisions to ensure that any bankrupt who tries to conceal resources from creditors or evade their obligations will end up with a longer bankruptcy term and a longer bankruptcy payment order. It also makes important changes to modernise bankruptcy procedures, reduce unnecessary costs and ensure that the official assignee has effective powers to focus on the small minority of bankrupts where there may be issues of fraud and concealment.

This Bill provides a further example of this Government's commitment to bringing forward practical reforms to ensure a more enlightened, less punitive, less costly approach to help people struggling with debt to return to solvency. I commend the Bill to the House.

Fianna Fáil will be supporting this Bill. The legislation reduces the bankruptcy term from three years to 12 months which is a very short period. It will not go unnoticed that less than three years after reducing the bankruptcy term to three years we are reducing it further. While it brings us into line with Northern Ireland and Britain it does mean that our bankruptcy laws will be out of line with most other jurisdictions. We hope there are enough protections in the Bill to prevent abuse by rogue business people. We have to learn from the past when some individuals got away scot free with reckless activity. The need to match this Bill with stronger legislation on white collar crime cannot be understated. On balance, however, we accept the Bill and will support it.

Last week the Cabinet rushed to get this bankruptcy Bill approved with a meeting taking place over the phone to approve the new legislation. Approval was required by Wednesday of last week to ensure the legislation would be enacted by Christmas.

Earlier this year in the Dáil the Minister for Finance, Deputy Michael Noonan, poured cold water on proposals to reduce the current term for discharge from bankruptcy from three years to one. In response to questions from Deputy Michael McGrath he stated:

Currently there is a lack of analysis of unintended consequences around further reducing the bankruptcy term to one year. I would be concerned that if we act in haste on this issue, without having conducted rigorous analysis of the objectives and impacts of such a change, we may not achieve the best outcomes for entrepreneurs or private individuals.

Despite his warning about acting in haste, the Attorney General was told just two weeks ago to draft a Bill.

On the aims of the Bill, it includes five key provisions: it reduces the automatic period for discharge from bankruptcy from three years to one; it reduces the term of bankruptcy payment orders from five years to three; it provides that where the family home has not been sold by the official assignee after a three-year period, it will revest in the bankrupt person; it increases the sanctions for those who fail to adequately co-operate with the official assignee during the bankruptcy process; and it abolishes the practice of the statutory sitting, whereby a bankrupt person was obliged to attend court after the adjudication of bankruptcy and make a full disclosure of his or her property.

Section 85 of the Bankruptcy Act 1988, as amended by the Personal Insolvency Act 2012, provides for automatic discharge after three years. The change to the bankruptcy term smacks of a last minute attempt to create a semblance of something being done. Families who are struggling to repay their mortgage need far more done to help them to stay in their homes.

For four years the Government resisted taking action to remove the bank veto. Following further questioning in the past month by Fianna Fáil, the Minister for Justice and Equality signed the commencement order this week for all remaining provisions of the Personal Insolvency (Amendment) Act. Not one family has, as yet, benefited from this provision owing to the delay in signing the commencement order.

There is the prospect of EU harmonisation of bankruptcy arrangements. The European Commission, in its recommendation, dated 12 March 2014, on a new approach to business failure and insolvency, suggested entrepreneurs should be discharged after three years. The cornerstone of any bankruptcy system should be fairness, not only to debtors who become bankrupt but also to creditors who have had their debts included in a bankruptcy. It should also be proportionate in striking a balance between the rights of creditors and the needs of debtors to seek relief from their unmanageable debts.

According to the Association of Personal Insolvency Practitioners:

The financial failure of some consumers is an inevitable part of any modern credit-based society and can arise for a number of different reasons: economic downturn, unemployment or illness. Often the media highlight the irresponsible or feckless behaviour of some debtors, but in our experience these examples are the exceptions to the rule and are unrepresentative of the majority of debtors.

I will now deal with the arguments in favour of reduced bankruptcy terms. A one-year term would make the financial institutions engage more with debtors in reaching meaningful solutions and encourage further engagement with the debt settlement arrangement and personal insolvency arrangement processes. It would pass on the benefits of economic recovery to all citizens by allowing people with crippling levels of debt associated with credit obtained during the economic boom to move on from that debt. This would allow the debtor to return to economic normality much faster. It is necessary to aid the economic recovery of the State and enable many of those caught up in bankruptcy to become positive contributors to the economy as quickly as possible. Commercial and consumer debts running to billions of euro have been sold to various funds and further sales are due to take place. It is difficult to predict how tough these funds will be on debtors in the future. Changing the bankruptcy term to one year would generate a more level playing field. It is important that appropriate safeguards be put in place to address situations where the bankrupt is not co-operative or acts in bad faith.

There are arguments against reducing the bankruptcy period to one year, as follows. The view was expressed to the justice committee that looked at this issue that the reduced time period of one year would make it too easy for the bankrupt to defer asset and income acquisition until after the expiry date. In addition, newer debt solutions such as the PIA or debt settlement arrangement would become less attractive. An alternative would be that the official assignee be given the right to apply to the High Court to discharge the bankrupt earlier. This would occur where the bankrupt had co-operated with the process and there was nothing further to be gained by enforcing the full period of three years. The official assignee is concerned that if a change to one year was made, Dublin could become the bankruptcy tourism capital of Europe and that the Insolvency Service of Ireland would not have adequate resources to handle the extra work arising therefrom. However, if the Irish courts were to adopt the same robust approach as in Northern Ireland, Dublin would not be as attractive to Europeans seeking bankruptcy.

Mr. Brendan Burgess of was quoted as saying:

There is a danger in reducing the bankruptcy period to a fixed one year that people may game the system as the term is so short ... The current widespread existence of deep negative equity is temporary and will not persist forever. With house prices recovering and with more conservative lending, it will probably be rare in a few years' time to find a borrower in deep negative equity. It's important to design legislation for the long term and not just for today's problem.

I also wish to quote Lisduggan District Credit Union which has stated the one-year term:

would constitute too easy a channel for individuals to enter in order to avoid having to take reasonable responsibility for debt incurred. In the case of a credit union, such a debt represents other members' savings and it is only equitable that there should be some level of endurance undergone before such funds have to be written off.

From a debtor perspective, while a reduction in the bankruptcy discharge term to one year might seem attractive, bankruptcy retains some severe disadvantages and restrictions and is not to be entered into lightly. Proponents of a reduced discharge period cite the increased probability of the bankrupted person retaining the family home, but this flies in the face of the following facts: some 75% of bankrupts end up losing the family home; the bankrupt is a persona non grata with banks, will lose his or her bank account and credit cards and is disbarred from seeking credit in excess of €600; the bankrupt's credit rating is effectively destroyed; the bankrupt may lose his or her job due to bankruptcy status and may well be disbarred from seeking certain forms of employment; and the bankrupt may not become a company director for the period of the bankruptcy. It is clear, however, that reducing the bankruptcy term would not solve the mortgage arrears crisis, despite the impression one might get in listening to some commentators. Nothing could be further from the truth. Reducing the bankruptcy term is one element of a far wider programme of measures needed to deal with families and businesses in financial difficulty. Over 38,000 families have been in mortgage arrears for more than two years. The reality is that bankruptcy will not be a silver bullet for most of them.

Earlier this year the Minister for Finance said that of those who had a family home and were declared bankrupt, approximately 70% would lose their home. They become homeless and have to seek social housing from their local authority as a result. Bankruptcy may be suitable in certain circumstances, but it is not a solution for the vast majority of households whose primary financial difficulty relates to being in arrears on a mortgage. What is really needed are proposals to reduce the number of home repossessions to a minimum. Fianna Fáil provided the Government with a template in the Family Home Mortgage Settlement Arrangement Bill 2014 which would have adapted the under-utilised insolvency service to allow a dedicated mechanism for dealing with the family home. For four years the Government resisted taking action to remove the bank veto. The change to the bankruptcy term is a last minute attempt to create a semblance that something is being done. Families who are struggling to repay their mortgage need far more done to help them to stay in their homes.

A new Central Bank report which looks at the causes of long-term mortgage arrears shows that, for those in long-term arrears, the amount by which they have fallen behind in their repayments is increasing in over 80% of cases. This indicates that there is a large cohort of mortgage borrowers who have not had an adequate payment restructuring plan put in place. This timely research from the Central Bank clearly highlights that the current approach being taken to dealing with serious arrears cases has not worked and is never going to work. It is completely unsurprising that high variable interest rates have driven many families into long-term arrears, as they typically end up with a mortgage repayment several hundred euro higher each month.

It is also notable that thousands of long-term arrears cases involve a situation where a job loss has occurred or the household has been reduced to a single income since the loan was taken out. Long-term arrears are also more common in households with three or more children.

Bankruptcy is not a solution for most people in this situation as it could involve the loss of the family home. The Government should be forcing the banks to put in place revised repayment terms to give a family a reasonable prospect of paying off their mortgage over an extended period of time.

In particular, permanent interest rate reduction should be used so the monthly repayment is brought down to a manageable level. The Bill is not a substitute, nor does it deal with the wider issue of rip-off mortgage rates, but it can certainly help families in arrears.

Split mortgages, where repayment of a portion of the loan is typically deferred for a number of years, have proven to be far more effective in dealing with arrears situations than simply adding the amount of arrears to the outstanding balance. The Government should force the banks to use this on a far more widespread basis and legislate accordingly if they fail to do so.

Last month the mortgage repossession figures provided another indication of how the Government is ignoring the escalating home repossession crisis. Figures show that up to November a shocking 4,440 repossession orders were lodged in the courts. The banks ramped up their repossession efforts over the past year, with 188 homes repossessed in July to September alone, a 92% increase on the same period in 2013.

The Government introduced the mortgage-to-rent scheme with the view to keeping people in their homes. However, the scheme has been a complete failure with only 2.9% of the 98,137 mortgage holders in arrears actually applying to use the scheme. The success rate of mortgage holders who have applied to the scheme is equally abysmal, with a mere 3% getting through the application process successfully.

More than 15% of mortgage accounts for family homes are now in arrears, which is more than three times higher than the figure at the end of December 2010. The most recent statistics from the Central Bank show that a staggering 117,000 principal dwelling house mortgage accounts are in arrears with almost 60,000 of these in arrears of a year or more. The country is potentially facing up to 25,000 home repossessions next year alone.

Homeless figures for families have risen fivefold since January alone. Three families are becoming homeless every single day and 1,570 children are currently sleeping in emergency accommodation. The crisis will get much worse unless the Government shakes itself out of its slumber and develops coherent policies for keeping families in their homes.

Fianna Fáil is supporting the Bill. I compliment Deputy Penrose who took the initiative and introduced a Private Members' Bill. I congratulate him on his success in getting the Bill sponsored by the Government in here. Many other Private Members' Bills, which the Government did not oppose on First or Second Stage, have unfortunately been parked and not brought any further.

While I congratulate Deputy Penrose on his initiative, the Government is playing both sides on many other Private Members' Bills. It claims to support them while at the same time not progressing that legislation further.

The Bill is well overdue and I welcome its publication. This chaotic Government tried to kick this issue to touch for as long as it could in asking the Joint Committee on Finance, Public Expenditure and Reform and the Joint Committee on Justice, Defence and Equality to look at the issue. Both committees were emphatic that we had to move to one-year bankruptcy but still months were allowed pass. Eventually the Government had to accept the demand for a one-year rule. In its last weeks it has struck the Government that maybe those in debt needed some more protection when struggling against the banks. This was a novel thought for the Government, but a blindingly obvious one for those of us working with people in debt in the real world day-in and day-out.

I welcome that from the day of commencement a one-year bankruptcy term will be available for everybody in the county, North and South. The use of the boat to Britain to exploit the one-year bankrupt terms there will hopefully come to an end and debtors in Ireland will be able to face up to bankruptcy in our own court systems. I welcome that a businessman facing bankruptcy in Donegal now has the same rights and responsibilities broadly speaking as a businessman in Derry.

Regardless of any wishful thinking expressed here today, I am under no illusion that this change will be a panacea to the country’s still huge debt problem. Those most likely to benefit are those with larger, more diverse debts. This is a solution more for the businessperson with many debts, business and personal, rather than for the homeowner whose debt is concentrated in a mortgage on the family home or even in a buy-to-let arrangement. For those people this move will be of limited use as the Government decided a long time ago that they were for the wolves or even the vultures.

Let us consider the facts. There were 206 repossessions during the most recent quarter, but that does not include so-called voluntary surrenders. In truth, 422 families lost their homes during this period which was identical to the previous quarter. That means four families a day are losing their homes. When these figures were first published in March 2012 the figure was 165 homes for the first quarter in 2012. Even when arrangements are made with homeowners they are more often than not the most unsustainable kind, such as arrears capitalisation or split mortgages.

Despite recent falls, the number of family homes in arrears of over 90 days stands at 8.7% of the total number of homes. In March 2011, the number was 6.7%. That shows the scale of the Government's failure. The idea of a tough Government making the banks act reasonably is well and truly dead. We have a walkover Government that has chosen the banks over homeowners and does not care about the social and economic consequences.

My party supports the Bill as a pragmatic step but it is no cure for five years of bad decisions. It is in fact an admission of failure. The Insolvency Service of Ireland has failed to be an effective remedy for tens of thousands of families who found themselves in debt after previous Governments and the banks had ruined the economy. It was supposed to be an alternative to bankruptcy. That we are liberalising our bankruptcy laws here today shows that did not happen. Like every other measure taken by this Government to tackle the debt crisis it has not fulfilled its role. The former Minister, Deputy Shatter, told my colleague, Deputy Pearse Doherty, that 18,000 people would use the insolvency service in its first year. Even now only 3,000 have made applications. That is a spectacular failure to deliver on one of the Government’s key initiatives to tackle the debt crisis.

In case Government spinners get carried away, the impact even for those who qualify for this new arrangement is likely to be the loss of the family home for many. That is how bankruptcy works. A person's assets are evaluated and stripped away leaving the bare minimum. It does not have to be that way of course. There should be legal protections for the family home and solutions short of bankruptcy which protect the family home. However, that is beyond the imagination of the Government. The banks had to come first. The law had to be changed to let banks off the leash so they could repossess at will.

Some will suggest the Bill creates a moral hazard. Some of them will have legitimate concerns about the future operations of our insolvency laws, but many of those shouting about moral hazard are perfectly happy to ignore the greatest moral hazard of the banks the people bailed out now repossessing the family homes of those same people.

The mortgage crisis rages on with four families a day now losing their home. I hope this step helps prevent some evictions, but the overall pattern is clear. After five years of belated initiatives and failed pet projects we are now in the dying days of this Government tampering with bankruptcy rules.

We had the mortgage-to-rent scheme. By October 2015, four years after the scheme was launched only 246 homes had been purchased under the scheme. Only 7% of the number of families the Labour Party claimed would avail of the scheme have been able to use the scheme successfully. A €20 million fund set up to help local authorities access the scheme has seen only €6 million drawn down to date.

The Tánaiste set up an independent financial service. Up to €10 million would be paid by the banks in a scheme where we were told more than 2,000 accountants gave financial advice to people in mortgage distress. The banks would pay for each consultation with an accountant, which costs €250. The scheme failed miserably.

I hope this Bill does help. My party will support anything that helps struggling homeowners and other stand up to the banks. It is far too late for thousands, unfortunately, and probably in a lot of cases far too little for thousands of others.

I support the Bill. I do not suppose anybody in this House will say they welcome the fact that we are talking about bankruptcy, several years after the crash, but this is an important initiative. However, much more is needed. It is extraordinary that moral hazard did not extend to some of the very large debtors in this country who are visibly back in action without having to go through bankruptcy because a different approach was taken depending on the scale of the debts. Moral hazard appears to be for the little people.

Many people who got into debt did so because they took risks based on a false premise in the early years of the noughties. Many businesses took extra credit to upscale and then found when the economy fell off a cliff that the payments could not be sustained. I spoke to one business person who told me the bank called the company in to talk about how it might put the business back on track. The bank insisted on getting in an expert to examine the technical arrangements that might improve the income of the business. The individual was forced to spend €12,000 on that process. A number of initiatives were identified to improve the business but when the individual went to the bank they were told the bank would not provide funding. The way back is the problem for many people. In the case I outlined the business is just about keeping its head above water but the bank was not there to help and support it to grow out of trouble.

I welcome the fact that the same bankruptcy regime now applies both North and South. The time difference was important. It was offensive to see people availing of the opportunity where they could, going to England, Wales and other places where a different regime prevailed.

The main area on which I wish to focus is mortgage arrears. Approximately 350,000 men, women and children in families in the country are in mortgage arrears and approximately 55,000 of those have been in arrears for more than two years. That does not account for local authority housing arrears, which are also sizeable. Mortgage arrears in this country are out of kilter with the rest of the European Union, including countries such as Spain, Greece and Portugal. In part, that has to do with the only options that are available for people to house themselves. Traditionally, people only had two options; first, to get a mortgage and buy a house and, second, to go on a housing waiting list. Housing waiting lists have been growing in recent decades so that has not been an option for many, and the option of renting in the private sector has come to the fore as a consequence. Ironically, it is the least secure and most expensive form of housing at the moment.

What is needed, in addition to a one year bankruptcy for those who, unfortunately, find themselves in that position, because it is not an easy process for anyone, is more than just that – we need a higher level of intervention if we are to get to the endgame for the families that are affected. What is necessary is to create a one-stop shop for borrowers in distress that is free at the point of use and provides expert financial and legal advice and representation. The last thing people in debt need is to be told to pay for advice. They are the very people who cannot afford it. Among the measures we advocate is to equip the courts to refuse possession orders based on the sustainability of the proposed restructure, mandating a set of restructuring options to be considered in all cases and improving access to the mortgage to rent scheme. Having been involved in a small number of such cases, it is like pulling hen’s teeth to try to get them over the line. One could spend eight or nine months with a family engaged in very dedicated work trying to get it across the line, which is very difficult. We must increase the sustainability of restructures by redefining them to include consideration of the total debts, including residual debt and payments post-retirement. Many people in the pre-crash era took out mortgages at a later point in their life than they would otherwise have done. When their income was reduced, the prospect of going into retirement with a reduced income becomes problematic where there is no prospect of additional income.

The reality is that one way or another there will be a cost to the State. There were seven families in the courts yesterday facing repossession orders. That happens on a daily basis in the courts in each county. Some cases are at the end of the process while other people are involved in one hearing after another until they reach the point of no return if their mortgage is not sustainable and other options are not brought into play. By definition, when a family is made homeless due to repossession they will be quite impoverished anyway or else they would have been paying the mortgage in order to avoid repossession. Most likely, they will end up getting rent assistance. In my area, rent assistance is way below the market rent but negotiations take place in order to prevent people becoming homeless. The typical amount provided in rent assistance is approximately €1,300 a month. Such families go on a housing list and if the HAP arrangement is in place, they can work, but if it is not they cannot work. It is stupid not to count the cost of stress because if people do not function optimally one takes away their ability to go back to work and thrive as individuals or as a family. That is an important element of what needs to be done. A more comprehensive arrangement must be put in place, in particular for those in mortgage debt because on its own the bankruptcy will not resolve the crisis.

The Oireachtas Joint Committee on Finance, Public Expenditure and Reform listed six principles in terms of dealing with the mortgage crisis. They were transparency, sustainability, dignity, equity, protection of Exchequer funds and stimulation of economic growth. Protection of Exchequer funds means that one does not count the cost, for example, of housing somebody if they end up losing the family home or becoming bankrupt because they will require to be assisted by the State.

In terms of respecting dignity, some of the pressures imposed on home owners by the lending institutions, with respect to their constant rounds of demands, have practically broken home owners' spirits. Home owners participating in the money arrears resolution process, MARP, got respite, to some degree, from the constant chasing by the banks where those home owners were under pressure and could not meet the costs involved but that is not a principle that was followed by some banks.

With respect to the sustainability aspect, all of a person's debts must be taken into account rather than, for example, only the mortgage issue. The totality of people's debts must be examined to ascertain how they can be helped to get to a point where they can have a sustainable future.

This is important legislation and I welcome that it is being taken today. It was initiated, as a Private Members' Bill, by Deputy Willie Penrose. I echo Deputy Mac Lochlainn's point regarding other legislation. I introduced a planning Bill, which I considered to be reasonable legislation. It was not opposed by the Government and was referred to a committee, of which I am a member. I was persuaded to take that Bill off the agenda on the basis that some of the issues in it would be included in planning legislation to be introduced at a future date. Not one further i was dotted nor t was crossed in that legislation following its referral to the committee. That was a waste of everybody's time. The Government either takes a Bill forward or it does not. It would be interesting if an analysis was carried out of the Private Members' Bills that have been put forward, into the preparation of which Members have devoted much time. Those Bills often contain very good ideas - I am not referring particularly to my Bill - that have not been picked up.

On the first day of this Dáil, the point was made that the Government would not have a monopoly on wisdom-----

-----but that is the way it has proceeded, pretty much right through this Dáil, when it comes to Opposition legislation. It is very demoralising.

It is called having a closed mind.

That is one of the reforms that needs to happen in the next Dáil, namely, that the monopoly on wisdom is not only to be found on one side of the Chamber but that is the way that Government proceeded-----

It is called power; power-corruption.

-----throughout this Dáil.

I am pleased to have this opportunity to say a few words on this Bill and to congratulate my colleague, Deputy Penrose, on bringing it forward. The reason I am speaking on this Bill is that the Joint Committee on Justice, Defence and Equality, which I chair, did some pre-legislative scrutiny of this Bill at the invitation of the Minister. We received 122 submissions, the vast majority of which were in favour of reducing the bankruptcy term from three years to one year. Prior to that, we had carried out some work on the insolvency legislation where the term was reduced from 12 years to three years, which at the time was a major change. This is a further development of that.

It went nowhere.

Does the Deputy want me to give way?

Members have a very short speaking time allocation.

I apologise, Deputy.

If the Deputy wants me to give way and invites me to do that, I will but if he interrupts me, that is not a display of good manners.

Deputy Stanton has the floor.

There is a procedure for asking a speaker to give way, which is not used here, as the Leas-Cheann Comhairle knows, but it should be used more often.

There is a stigma or a shame attached to bankruptcy. That dates back to when people were lodged in debtors' prisons for not being able to discharge their bankruptcy. That stigma still prevails. One of the submissions suggested that we should stop using the word "bankruptcy" and should use a word such as some form of debt relief or something like that. We all know people and families who have been impacted by bankruptcy. I know one family which lost their home and are now renting a house. That family are three years in bankruptcy and it will take another five years to for them to pay off their debts, so they will have a term of eight years. That period is now being reduced to a total of four years. A certain amount of that family's income has to go to pay their debt. Families such as that family will be impacted in a positive way by this legislation in that they will also benefit from the reductions, even though there are currently in the system, with the giving of a six-month lead-in time or that of one year, whichever is the longer period. I understand that the gross incomes of such families are taken into account when it comes to issues such as the granting of approval for social housing. Will the Minister of State, Deputy Kevin Humphreys, check that with his colleagues because that is not very fair? I know an individual who went into bankruptcy; he has a good job but his gross income is taken into account, even though his net income is quite low because he has to give so much to pay the debt every month. Also, where medical cards are concerned, the same applies. We should examine this aspect of the legislation and examine the impact of bankruptcy on other payments and supports that families have. Bankruptcy is not easy, whether it is for a term of one year or three years. One virtually loses everything. There is a provision in the legislation to safeguard the family home, which I welcome. It reassigns the home back to the person after a period of time. That is a new provision and many people have not picked up on it.

I note Deputy Niall Collins said that we should not rush into this, that we should take our time and that there should be more debate on it but we have debated this issue. Two committees - the Joint Committee on Finance, Public Expenditure and Reform and the Joint Committee on Justice, Defence and Equality - have examined it. We sought submissions on it and received 122. We held hearings and we prepared an official report on it. This issue has been examined in detail and at length. Not everybody who wrote to us was in favour of reducing the bankruptcy term to one year but, on balance, the committee unanimously felt we should reduce it. We presented our report to the Minister at the start of the summer. The legislation was produced quite quickly and we are processing it today. From what I gather, nobody is opposing it, which is welcome.

My good friend and colleague from Sinn Féin, Deputy Mac Lochlainn, said we were not proceeding as quickly as we should be on this. I have been a Member of this House for quite a while and I think this legislation has been produced quite quickly. What is proposed in this legislation is not trivial, rather it is quite serious. Some people have major reservations about what this legislation proposes but the safeguards built into it are quite good. They go beyond what the joint committee sought. For instance, in extreme cases, people can have their period of bankruptcy extended by the High Court to 15 years where they do not divulge their full assets and so forth. That should act as a major deterrent to people who might try to blackguard the legislation in some way or other.

The joint committee observed that a one-year term would encourage the financial institutions to engage more with debtors in reaching meaningful solutions and would encourage further engagement with debt settlement arrangement, DSA, or personal insolvency arrangement, PIA, processes. We also recommended in our initial report a number of years ago that there should be an appeals mechanism. At the time, it was felt that we should try it without one but I note that there is now an appeals mechanism involved where the financial institutions veto the arrangements. I welcome that mechanism.

The reduced bankruptcy term would pass on the benefits of an economic recovery to all citizens by allowing people with crippling debt associated with credit obtained during the economic boom to move on from that debt. I note from some observations - I think a previous speaker made this point - that people like Henry Ford, Walt Disney and others went bankrupt at one stage, came out of it and contributed very positively to society. We want to see people return to economic activity faster than they can at present. A particular context for this would be the issue of negative equity. This would bring us in line with Northern Ireland and other common law jurisdictions, which is quite important.

We were told that a family home should be offered a certain element of protection and that is included in this legislation, which is good. One submission expressed the view that banks may be willing to offer forbearance on mortgage debt for one year while the bankrupt goes through the process.

That is good. Credit unions said the debt "represents other members' savings and the debtor undertaking a level of endurance before it can be written off is argued as equitable". Bankruptcy is hard, whether it is one or three years. Once one is in it, one is in it. We are giving people an opportunity to emerge from bankruptcy in a faster time than in the past, when it was 12 years.

We are moving away from bankruptcy being seen as a thing of shame. In the US, people try and fail and then try again. Others say at least the person tried, had a go, is back again and is benefitting his or her family, himself or herself and the economy and perhaps is employing people as well. We want to move away from the notion of bankrupts being seen somehow as crooks.

Many people were caught through no fault of their own because of the economic downturn and ended up facing bankruptcy or other major financial difficulties. I concur with the Minister's call on people to engage with financial institutions and to seek help early if they are under financial pressure. We are trying to make it easier for people to do that in the legislation.

The argument was made to my committee that the official assignee should be given the right to apply to the High Court to discharge the bankrupt earlier and this would occur where he or she had co-operated with the process and there was nothing further to be gained from enforcing the full three-year term. I am also happy about the appeals mechanism. There was overwhelming support for reducing the term from three years to one and reducing the associated income payments order from five years to three, which is important and which is also provided for in the legislation.

On behalf of colleagues on the committee, I am happy to welcome the Bill and to recognise the fact that there was detailed discussion and consultation with experts in the area. We invited people to make submissions and we received 122 detailed submissions, many of which were personal stories, which we could not use because of the confidentiality involved. People found themselves in bankruptcy and they had struggled for three years or more. This is good legislation, which is being introduced at a good time. I am delighted it will be enacted. The moral hazard issue has been dealt with as well and I am delighted this recommendation from the committee has been taken on board.

I congratulate Deputy Penrose on initiating this process.

I welcome the opportunity to contribute to the debate and I compliment my constituency colleague for ensuring this legislation was brought forward. This is one of the first backbench Bills to be enacted during the Government's five-year term. While I compliment my colleague, it is a great shame on the part of the Government parties that they have introduced Friday sittings and lauded themselves for giving Members an opportunity to bring forward legislation but have not taken any of it on board, with the exception of this Bill.

The proposal to reduce the term of bankruptcy to one year is certainly a radical move and a significant departure from old cultural views of dealing with debt. This legislation is a pro-enterprise and a rational measure, and l sincerely hope it will be an effective one. One of the greatest challenges faced by our people from the onset of the global economic and financial crisis was the significant debt that many found themselves engulfed in when the economic tsunami hit the country. Many people, who had been in a position to repay money borrowed from financial institutions in previous years, found that their income had reduced or disappeared altogether as a result of unemployment. Unfortunately, the legislative instruments of the State had not developed any capacity since Independence to deal with the kind of debt crisis we all witnessed.

There have been a number of false dawns in the Government's actions to deal with the personal debt crisis, including the utterly impotent Personal Insolvency Act 2012, which left the banks with a veto on proposed settlements by the debtor. It is a crying shame that five years into the lifetime of the Government, in the dying days of the Administration, it feels it is an appropriate time to bring forward this legislation. How many thousands of families have been left unaided by the Government over the past five years?

The legislation will, hopefully, reach new levels in addressing the crisis endured by so many people over the past number of years. It will amend the Bankruptcy Act 1988 by reducing the automatic period for discharge from bankruptcy from three years to one year; reducing the term of bankruptcy payment orders from five years to three years; providing that where the family home has not been sold by the official assignee after a three-year period, it will revest in the bankrupt person; increasing the sanctions for those who fail to adequately co-operate with the official assignee during the bankruptcy process; and abolishing the practice of the statutory sitting, whereby a bankrupt person was obliged to attend court after the adjudication of bankruptcy and make a full disclosure of his or her property.

Many of the proposals contained in the legislation follow the submissions made by my colleagues on the Joint Committee on Justice, Equality and Defence, which was mentioned earlier by its chairperson. The committee received a significant number of submissions in the area and published a report, which stated there was "overwhelming support for reducing the term". I was struck by two submissions by the Association of Personal Insolvency Practitioners, APIP, and the Free Legal Advice Centre, FLAC. APIP stated:

We believe that where debtors have fully cooperated with the Official Assignee and make a full and honest disclosure of all their assets and liabilities, there is no public good served by delaying a debtor's discharge beyond one year... [T]he stigma of bankruptcy and the restrictions associated with it are onerous and harsh and where the bankruptcy arises from no fault of the debtor or through their misfortune, we believe providing a discharge for the bankruptcy after one year is proportionate.

In a similar vein, FLAC stated: "For consumers, unexpectedly faced with massive, unexpected over-indebtedness, the three year term of being bankrupt is a long one and the label and connotation of bankruptcy can be a heavy burden for them and their families to face." It was clear that many stakeholders who made submissions to the committee felt the current regime was too onerous. It was also pointed out by a number of them that a reduction in the bankruptcy period, as well as a reduction in the terms of income payment orders, would bring Ireland into line with the United Kingdom and, therefore, make our debt restructuring system more competitive. The legislation, thankfully, follows that line, which is significant.

One of the reasons for Ireland's economic success and for our thriving cultural and social life is the fact that we are a small, flexible and open society and economy acting as a bridge between the US and the EU. There are many benefits to this. However, this model also shines a bright and intense light on weaknesses within our economy. One of those weaknesses includes our outdated legislative instruments for dealing with debt, which place too onerous a burden on those seeking a fresh start. As a result of the weaknesses in how we dealt with debt, many Irish debtors opted to file for bankruptcy in England instead of the state in which they had most of their business dealings. European legislation facilitated this easy reorganising of affairs to qualify for UK bankruptcy, often putting businesses here at a loss. By reforming our laws, we, as a country, will become competitive in how we deal with the business people who find themselves in this tough position and, hopefully, will provide a solution to the problems many people still face here.

It is important, however, to ensure that the new debt restructuring system is not left open to abuse by individuals who are simply seeking to game the system and leave other businesses at a loss. After all, bankruptcy often leaves other functioning businesses facing bills left unpaid by those granted bankruptcy. There is a need for the new legislation to ensure those who decide to opt for bankruptcy to show the utmost good faith. Failure to do so should disqualify them from any settlement under these proposals. It is up to both the courts and the executive to guard against any abuses which may become apparent following the enactment of this Bill.

We have a duty to all citizens, not only those in debt. We must offer a path forward for those who find themselves engulfed in debt, while at the same time protect the interests of those hard-working people who engage in businesses across the country and pay their way. There is a need for a balance to be struck and one area where a balance has not been struck is dealing with the mortgage and housing crisis. It is unlikely that the Bill will significantly address this problem, yet it appears that the Government is seeking to declare that the mortgage arrears crisis will be resolved through bankruptcy, but nothing could be further from the truth. The shocking reality is that more than 38,000 families have been in mortgage arrears for more than two years and bankruptcy will not be an effective remedy for them. In a significant admission, the Minister for Finance stated earlier in 2015 that approximately 70% of those who were declared bankrupt would lose their family home. They become homeless and as a result have to seek social housing from their local authority. That policy does not make sense to me or other Members in the Chamber. By repossessing homes, the banks are simply shifting the problem from their balance sheets to social housing lists, which causes massive distress and trauma for families across the country.

While there are many things for which the Government can be lauded, its failure in dealing with the problem of housing and homelessness and in the health service will be a black mark against any of the achievements it tries to claim. While listening to the radio today, I heard that 1,000 children would spend Christmas in a hotel because of the failure of the Government which has prevented the construction of affordable houses in cities in order to drive up NAMA's revenues. It has slashed local authority budgets, resulting in full social housing waiting lists. It has sold off thousands of housing units to US vulture funds as citizens sleep rough on the streets. It has ended the dream of home ownership for many generations with its rules for mortgages and caused many families across the country to be evicted because of its repossession rules. Its legacy in the area of housing will be to its great shame.

I am glad to make a contribution to this debate. I welcome the main thrust of the Bill, which is to reduce the period of discharge for bankruptcy from three years to one. I commend Deputy Willie Penrose who has pursued this issue relentlessly in the past few months and also the valuable contribution of the Joint Committee on Justice, Defence and Equality which is chaired by Deputy David Stanton. I also commend the Minister for Finance for listening to what needed to be done and bringing the Bill to the floor of the House. It will bring Ireland into line with many other countries and provides for enough checks and balances to allow those who are totally overburdened by debt to see some light at the end of the tunnel. At the same time it provides for extended bankruptcy and bankruptcy payment orders where someone is unco-operative or fraudulent. It will give a break to those who are genuinely trying to make a new start and has the capacity to increase the sanctions for those who fail to co-operate. It will also abolish the statutory setting whereby a bankrupt person was obliged to attend court after the adjudication of bankruptcy. Many saw this as a public humiliation. The net effect will be to allow more families to stay in the family home.

I have illustrated some of the positive outcomes that will flow from the passing of the Bill. However, there are a number of anomalies for those who have taken the bankruptcy route under the old system. I have spoken to a person who has been in the bankruptcy process for five months and will have an 18-month term with three years income payments. This, effectively, only reduces his term by six months and he believes he is being penalised for being courageous enough to take the bankruptcy route before the term was reduced. Under the Personal Insolvency Act 2012, the ceiling for the debt relief notice has been increased to €35,000 in recent times, but the criteria for access to debt relief notices are too restrictive. MABS deals with people in this category. If one has disposable income of more than €60, assets worth more than €400 or a car with a value greater than €2,000, one is not eligible. These thresholds need to be looked at urgently and increased. Only 500 debt settlement arrangements were made in 2015, which is too low and strongly suggests banks are vetoing many proposed settlements. Some 65% of creditors have to approve the settlement. This figure needs to be looked at again or banks will continue to have a veto. I welcome the commencement in recent weeks of independent court reviews of the so-called bank veto which allows creditors to reject a personal insolvency proposal. That issue is being looked at and not before time.

Insolvency was the result of financial madness, not only on the part of consumers but also because of reckless lending. When the legislation to deal with insolvency was introduced, it was at a time when the banks were insolvent and loss-making. The legislation was balanced in favour of the banks, which is no longer the case. There has been substantial recovery in property prices, but it has been confined mainly to urban areas. Provincial Ireland still has a long way to go to catch up. Banks lent vast sums of money on an interest-only basis to individuals on the basis of providing security only to purchase rental property. Unless a financial institution can prove it established the capacity of the borrower to service the debt over a 25-year period and by the age of 70 years, the borrower should be given the option of selling the property and repaying the bank with the proceeds. In such a case, a large percentage of any shortfall should be written off by the bank as it was clearly caused by poor lending practice.

I welcome the opportunity to contribute to the debate. I welcome the Bankruptcy (Amendment) Bill 2015 which is being introduced as a result of the report of the Joint Committee on Justice, Defence and Equality on bankruptcy reform. The Bill will further improve and modernise bankruptcy law and take into account the changes to bankruptcy law proposed by Deputy Willie Penrose in a Private Members' Bill published in March. I thank the Deputy for the work he has carried out on bankruptcy law and congratulate him on the amendments and improvements he has made to this very important legislation. I have no doubt that his contributions have enhanced the Bill.

The Bill will make many changes to existing bankruptcy law, including the reduction of the bankruptcy term from three years to one in all new bankruptcy cases. It will provide for those already in bankruptcy for one year when it comes into force to be discharged from bankruptcy after a six-month transitional period. It will reduce the maximum duration of bankruptcy payment orders from five years to three. These orders require a bankrupt person to pay specified amounts from their income or assets to the official assignee for the benefit of creditors. The Bill will enable the bankruptcy term to be extended to up to eight years in cases where the bankrupt person is concealing income or assets or refusing to co-operate with the official assignees. In such cases a bankruptcy payment order can still be made for up to five years. In very serious cases of non-co-operation or concealment, it will give the court power to extend the bankruptcy term up to a maximum of 15 years. It will provide for the bankrupt person's interest in his or her home to be revested in him or her three years after adjudication if the official assignee has not applied to court within the period for its sale. It will give the official assignee power to disclaim onerous assets. Under Irish law, he or she is obliged to take over legal liabilities on assets owned by the bankrupt person. This can result in the official assignee having to cover expensive costs of urgent repairs and make safe unfinished sites at the taxpayer's expense, while the profits from these assets go exclusively to a small number of creditors. The change will reflect the position in the United Kingdom in order that the beneficiary of the asset will, effectively, take over the liabilities.

As a result of our economic crisis many of those now entering bankruptcy, or already in bankruptcy, have been struggling with unsustainable debt for the past six or seven years. The background to the economic crisis is the disastrous economic policies of the previous Fianna Fáil-led Government. A reduced bankruptcy term and shorter duration for bankruptcy payment orders will provide people in serious debt and no disposable income with an early return to normal economic activity. These changes also constitute a practical boost for entrepreneurs, particularly small entrepreneurs. At the same time, the proposals include strong measures to ensure that a bankrupt who tries to conceal resources from creditors, or to evade his or her obligations, will be liable to a longer bankruptcy term and a longer bankruptcy payment order.

Other changes to the legislation will streamline and modernise key bankruptcy procedures and strengthen the powers of the official assignee. These changes will free up the resources of the official assignee to focus on the small minority of bankrupts in respect of whom there are issues of fraud and concealment. The changes will also save unnecessary bankruptcy administration costs to the State, creditors and debtors and will free up court time. The provisions in the Bankruptcy (Amendment) Bill 2015 complement the reforms which the Government has already introduced, from enactment of the Personal Insolvency Act 2012 onwards. They represent a more modern, less costly, and better balanced approach to a return to solvency for people in debt.

Before entering politics, I ran an electrical wholesale business. More than most, I understand the difficulties faced by people who run into financial difficulties, in many cases through no fault of their own. During my time in business and, more recently, as a Deputy, I have dealt with many people who have run into financial difficulties. The amendments being made to the Bankruptcy Act 2015 will help those who cannot free themselves from unsustainable debt. The changes being introduced will allow those people make a fresh start from the unsustainable debt that up to now has been a noose around their necks.

I would like to put on the record of the House my support for the amendments to the Bankruptcy Act, which I believe will be a great assistance to those whose debt is unsustainable and want to make a real and genuine effort to break free from that debt. I also welcome that this legislation will act as deterrent to those who do not want to honour their debts or believe that by hiding their assets they can get away with paying those debts.

I welcome the introduction of the Bankruptcy (Amendment) Bill 2015, the central core of which contains the objectives which together with my party colleagues I sought to achieve when I published the Personal Insolvency (Amendment) Bill 2015. I thank the Minister for adopting the central principles of that Bill and enacting them in to law. I also thank all Deputies who engaged in a synchronised advocacy of the Bill on the floor of this House, led by the redoubtable and knowledgeable, from a financial perspective, Deputy Peter Mathews.

The genesis of this Bill is a conversation at the kitchen table in my home in Ballynacargy one Friday evening with my two daughters, Aisling, who is a solicitor and, Niamh, who is training to be an accountant, both of whom, having listened to me speak about this issue on many occasions, urged me to do something to address it.

Bankruptcy is no walk in the park. Nobody who makes the decision to invest money or purchase a property does so with the deliberate intention of going bankrupt. That is a misconception. When a person is declared bankrupt the official assignee takes over responsibility for the administration of all of his or her assets and income, leaving that person paralysed in that regard. The official assignee also takes over responsibility for payment of creditors. However, security over an asset, namely, a mortgage on a home, is not impaired by the bankruptcy. Were it taken into account in regard to the bankruptcy, then peculiarly this would be for the better because under section 61(4) of the Bankruptcy Act the official assignee cannot dispose of a bankrupt's home without the permission of the High Court, which court has wide discretion in coming to a decision in that regard and has regard to the requirements and needs of the bankrupt and his or her dependants.

I detest the argument of moral hazard. Originally, moral hazard was the responsibility of the lender.

With sleight of hand and adroitness, which only financial institutions can display, it was neatly transferred to the borrower-debtor.

That should not be forgotten. The bankrupt is required to make full disclosure of all assets and income to the official assignee. Also, if there is any change in the bankrupt's circumstances he or she must make that known to the official assignee. Bankruptcy remains a stigma, although perception in that regard is reducing. Bankruptcy is a matter of public record and it affects a person's future credit rating. In that regard, the Government now needs to engage with the Irish Credit Bureau on removal of a bankrupt's bad credit rating after 12 months. It is not right that people would be penalised for life by a credit rating.

It is important that issue is addressed. It is also important that professionals and so on declared bankrupt are able to continue to act in their professions. Bankruptcy is not a moral sin. People should be able to continue to act in their profession. It is no longer acceptable that this cloud of venality be imposed on people.

It is important in the context of the person's physical health.

Exactly. This Government is proud to have overhauled Ireland's bankruptcy legislation, thereby leapfrogging the 20th century and replacing harsh and unforgiving Victorian attitudes - debtors' prisons - with the principles of welfare and equal treatment that are the bedrock of the modern Republic that Connolly and Pearse gifted to us with their lives. The aim of this Bill is to give people a second chance so that they can return to normal economic activity as soon as possible. We have to move on from the idea of punishing people who engaged in normal economic activity but suffered economic misfortune due to adverse economic circumstances which nobody could predict. It is vindictiveness at its basic level if we continue down that road. Had other countries continued down that road, people such as Henry Ford, Abraham Lincoln and Walt Disney would have been denied an opportunity to return to economic activity. Northern Ireland has not fallen apart because it introduced a one-year bankruptcy rule.

We have achieved a lot but we need now to address some minor technical amendments, which are self-explanatory, including the revesting of ownership in the family home, which proposal my daughters were instrumental in bringing to the fore and which is essential to the psyche of the nation's mental health and self-esteem. We need to eliminate the wholly unnecessary and embarrassing statutory court sitting and, most importantly, reduce the bankruptcy period to 12 months. Today, we have the opportunity to stimulate the recovery of the forgotten. In reducing the bankruptcy period from three years to 12 months we do so not only to align ourselves with modern nations but because it is the right and proper thing to do. As parliamentarians, it is our obligation to ensure this is done.

The wording of the 1916 Proclamation come to mind at this point. I am reminded that Connolly and Pearse pledged themselves not only to the obvious cause of Ireland's freedom but, as they seized their moment to declare Ireland a Republic and a sovereign State, so, too, did they proclaim and pledge themselves to the cause of the welfare of the Irish people. This is the cause of the Labour Party also. It is on the subject of the welfare of the Irish people that I particularly address this House today. The heroes of 1916 declared the right of the people of Ireland to the ownership of Ireland, to the unfettered control of Irish destinies and, as a nation, to free us from the yoke of usurpation of a foreign government and people. In that great endeavour, they largely succeeded.

However, for a great many of Irish people - not just anonymous statistics but real families in real communities in real homes across this land - the yoke of usurpation by foreign people weighs heavily upon real people. That usurpation has worsened with the mass sale of the worth of people's lives to hedge funds and other unregulated entities owned by the very foreigners from whom Connolly and Pearse tried to free us. I speak today not of foreign governments, because that usurpation has been consigned to history, but about the usurpation of the lives of the people of Ireland by invading hedge funds and unregulated entities who have landed on our shores in fleets of private jets. I am not here today to make apologies for real people who followed the trusted advice heaped upon them by banks and financial institutions, who while insolvent, pushed money on the people. As Deputy Mathews has often said, they knew what they were doing was wrong.

I want to help protect those people from the consequences of the bad decisions and bad advice for which not one of the myriad people who ought to be accountable has ever been held to account. The recovery of this economy has been good for many industries, sectors and people but it has left a great many people behind. For these people the recovery is perhaps too late. Perhaps, they are in the wrong sector. We have allowed ourselves languish in the belief - indeed we have allowed ourselves to be deceived yet again by bankers into believing - that unresolved legacy debt was being addressed. Through the fog of public relations and spin it seems that little has been resolved. The bucket has been kicked down the road while banks have strengthened their balance sheets with public moneys and Government support. As the optics now align favourably for the banks, what are they doing?

They are selling the bucket. Notwithstanding the improvements in the insolvency process and in legislation, this bucket of unresolved legacy debt is now very much full. The debt has gone nowhere. It has been swirled around the banker's bucket. All that has changed is the owner of the bucket. The debt has not been closed off and people have not been able to get back on their feet. Now those distressed people have to start all over again and deal with the new owner of this toxic bucket except this time the owner of the bucket is foreign, alien, unregulated, mercenary and merciless.

When we listen to the people involved at the coalface dealing with debt and mortgage distress, we hear their despair at the intransigence of financial institutions that continually fail to face up to reality. People are genuinely trying to address their situation, which is clearly new and different to when they entered into their loan or mortgage contract, but the banks and other funds steadfastly refuse to deal with them or be realistic. The pip squeaking is not enough for them and the law of the land has been condoning if not encouraging this behaviour.

I have heard too many stories of people ending up in casualty wards with chest pains. I have heard too many stories of suicide and attempted suicide, often for extraordinarily small sums. It is now time for this sovereign Parliament to address the imbalance-----

-----to live up to and, today, deliver the aspirations of the heroes of 1916 and to ensure the people of Ireland are free from the tyranny of foreign people holding Irish debt. Today we declare the right of the people of Ireland to the ownership of Ireland. We declare the right of the people of Ireland to the unfettered control of Irish destinies and one small step in that direction is to reduce the three-year bankruptcy period to 12 months.

This will achieve two things. It will create some equality of arms between the legacy debtor and the new hedge fund or financial institution involved. It is intended to oblige the hedge funds, which I remind the House are unregulated entities answerable to no one, to take commercial stock of the realities of an application for bankruptcy. The question will be whether these hedge funds would prefer to have to deal with a bankruptcy situation rather than achieving a speedy, purposeful and sensible working out of the situation at a fair price.

Connolly and Pearse's declaration of a Republic in 1916 guaranteed equal rights and equal opportunities to all our citizens. They declared their resolve to pursue the happiness and prosperity of the whole nation and all its parts, cherishing all the children of the nation equally. Sadly, for a great many, recovery cannot happen. Great swathes of this nation are unhappy. It seems to me to be of cardinal importance that the three-year bankruptcy period be reduced to 12 months to offer them some hope.

The second benefit is that it will immediately restore confidence.

It will make certain that which was uncertain and over which great anxiety floated. It will create a more tangible and manageable horizon for distressed and anxious borrowers to head towards. Its worth is that it creates for them the perception that the tunnel is now short. Its value is that it imbues them with the confidence to believe that it is the light of hope and of a future with purpose that beckons them from the end of that tunnel.

The Deputy's time is finished.

I will conclude on this point.

We have an extra ten minutes at the end of this.

We would like to hear him.

It is the stimulus that stimulates them to believe in themselves again, to believe in this great nation and to see this nightmare end.

This is a relatively small amendment but its impact is huge and its message significant. The dynamic amendment has the capacity to shift the mind space and thinking of distressed persons, who have otherwise abandoned all sense of hope. It is proximate. It is nearly immediate. Closure approaches. It will stimulate them back to recovery and employment and once again to create employment and walk with pride in their neighbourhoods. They will walk as productive and contributing Irishmen and Irishwomen should - free from the yoke of oppression of foreign bankers and unregulated hedge funds.

This is a good day and I hope to God it gets better for the many thousands of our fellow citizens who find themselves in financial distress and difficulty. It is clear I support the Bill.

It is a tough one to follow but Deputy Penrose is right at every level. He is right logically, in his mind and in his heart. He has analysed the situation as it is. What is meant by bankruptcy? The banks ruptured this country. Deputy Catherine Murphy referred to the lending institutions. They are not lending institutions. They get a licence to take deposits. Only when they know how to lend properly can they use those deposits to generate activity and commerce in the economy.

Our banks are measurably guilty at a level of 80% for the asset price bubble on a credit pyramid that went out of control in the seven years from 2001 to 2008 and the €5 million banking inquiry has not even touched on it. That is how pathetic the inquiry was. Boards of directors of the domestic banks in this country went way out of control. They lent all the deposits - the savings of businesses and households - and ramped things up further on a cocaine-fuelled credit pyramid. They more than doubled the size of the domestic banking economy in five years. That is woefully guilty conduct. It left the people victims of the crash and we are now trying to bandage them with a sticky plaster one year bankruptcy term and a hesitancy in clearing the mess up in a manly sort of way. There is a suspicion that most of them are trying to hide things and are perhaps not being honest. It is laughable.

I read of the sanctions for non-co-operation or concealment by the bankrupt but the banks concealed everything. They concealed their balance sheets to such an extent, the last Government gave a blanket liabilities guarantee. This guarantee now has an easily identifiable residual of €25 billion in the Governor of the Central Bank's office desk. It is the so-called genius trick of our Minister for Finance to extend the promissory note of ten to 12 years into a long-dated promissory bond. He had no business doing that. On 18 February next, I hope Deputy Joan Collins will be vindicated in the Supreme Court. The Minister for Finance put the people on the line for €31 billion, at the time, without even legislation being passed in this Parliament. Some €25 billion is still outstanding. Let us think about that €25 billion. We should cancel it because there is no validity in it whatsoever. It has zero validity. If anyone thinks there is a validity to it, let them show it, because there is not. It is the losses of two private banks, namely, Irish Nationwide Building Society and Anglo Irish Bank-IBRC.

We hear people talking about bankruptcy and shame. There is no shame. It is a fact. If people do not have the assets to discharge their liabilities, that is just a fact. It can be compared to a collapse of their bodies. If their hearts are not working, they are just physically ill. That is okay. It does not matter. The cause of a disease or lack of health does not matter. The fact is that they are not well and one brings all the assistance to make them well again. One does not make them a little well or give them Lucozade when they need surgery.

The Minister stated:

I think Deputies will agree that this Bill represents an important milestone. [The Bill] comes at the right time.

What a load of nonsense. That is utterly pathetic. If the medicine or the surgery does not arrive at the time it is needed, it is a waste of time. The Government had five years and massive numbers to do certain things. It did not listen to some of the good ideas on this side of the House. It did not even listen to its own backbenchers. I had that experience because I was once in the Fine Gael party. It did not want to know some good ideas. It had the monopoly on wisdom.

If the Government really was compassionate for the Irish people, it would take on board those ideas. They are evidence-based and would make progress. They would cure ills and fix situations. However, the Government will not do that. If we take away the fig leaf of "the fastest growing economy in Europe" and look at the reality, we see that housing waiting lists are at their longest. The number of people waiting for hospital elective surgeries and procedures stands at 400,000. I appeal to God almighty. It is more than the population of Cork. Schools and universities are threadbare and our universities' rankings are slipping. We have homelessness. We have mortgage debt, with 38,000 people in arrears of two years or more. These are the realities.

It is argued that a relatively small number of bankruptcy cases feature particularly serious and flagrant levels of concealment by the bankrupt, for which there is currently no adequate deterrent. However, the banks fooled the last Government and are currently fooling this one. Does the Government believe there has been any serious or meaningful restructuring by the banks? There has been very little and I know this because I have been involved with a number of cases. It is a farce. The banks are out of operational control and do not know what is happening. The legal divisions of banks are sending correspondence, as are the arrears divisions. The people who are trying to arrange restructuring do not know where they are. That is the reality. I know because I am dealing with it.

Bank of Ireland, when it was lining up assets for transfer into NAMA, mysteriously reduced the prospective bill of lading, or transfer, of €16 billion into NAMA to €12 billion. How in the name of God, back in 2009, could one have a reduction in toxic loan portfolios to be transferred into NAMA? Anyone with even half a brain or half a day's experience in loan ledger management would know that it is impossible but the bank did it. Why? It was done because €4 billion at the then prospective discount rate of 30% amounts to €1.2 billion and that was the reduction of the requirement for recapitalisation which kept Bank of Ireland out of State majority control. The bank fooled us. It fooled us again when a consortium of five investors bought 35% of the bank for €1.1 billion. That was stupid. I told the Taoiseach at the time not to proceed but to pause. Wilbur Ross, who was a genius in his own interests, made €0.5 billion profit on his little proportion of that consortium. It was a one-way bet; he could not have lost. What genius allowed that to happen?

The Government should reorder its priorities and put the people of Ireland first rather than the establishment and the vested interests. However, it must do its homework because it has not done it yet. If the Government had done its homework, it would know what to do. The Government has failed, for instance, to send notices of assessment to the multi-national corporations on their profits which have been increasing since 2008. That would have been pushing an open door but the Government did not do it. It was afraid of its own shadow and was pathetic. It was prepared to allow banks to beat up small family businesses while shivering at the prospect of the multinational corporations leaving. Those corporations are now paying that money and the Government is scratching its head and asking where the extra corporation tax is coming from. The corporations know the game is up and that they have to pay it.

I commend Deputy Penrose on bringing forward this Bill It is a great achievement but it is just-----

What a waste of time. What will the Government do for the Irish people? It could cancel the €25 billion-----

Deputy Mathews, your time is up.

It could reinstate the pension fund, the €17 billion that was plundered-----

It could use €4 billion of the remaining €8 billion to refurbish and repair the water supply system, which this crazy elephant-----

The Deputy should have some manners.

Deputy Mathews, please show some respect for the Chair. Your time is up and you are now eating into other people's time.

Deputy Mathews should have some manners.

The next speaker is Deputy Robert Dowds, who has ten minutes.

The man sitting next to me, Deputy Willie Penrose, is an awkward so-and-so. He is determined and is like an elephant who digs himself in and refuses to move. In that, he has taught me a great deal about what one has to do to achieve anything in this House. Deputy Penrose is driven by the Labour Party ideal that people should be treated fairly and equally and with the support of our parliamentary party, he was determined that he would progress matters for people who are in the unfortunate position of being bankrupt. As I observed the situation in the past few months, I began to wonder if he would succeed because for a long time Deputy Penrose and the parliamentary party seemed to be knocking their heads against a brick wall. That brick wall is in the Department of Finance and in the permanent government's unwillingness to accept change.

A critical element in moving this Bill forward was the fact that Fine Gael backbenchers, through their involvement with their constituents also realised that a serious issue had to be addressed. It took a great deal of pressure from the Labour Party's parliamentary party and the Fine Gael backbenchers to move the issue forward. It is so important that this Bill is before us now, for the reasons outlined by Deputy Penrose earlier. It will put people in a situation where they can begin to live their lives again. It also demonstrates the importance of backbenchers in this Parliament. We have our ears to the ground in a way that the permanent government does not. We know and understand the situation that many people are facing. In that context, it is important that more space be given to backbenchers to promote Bills of their own. While I welcome the Bill before us, it should have Deputy Penrose's name on it.

The Chief Whip has admitted the need for further parliamentary reform so that backbenchers, whether on the Government or Opposition benches, who bring Bills forward can progress them in their own name. This Bill really should have Deputy Penrose's name on it but it has the Minister for Justice and Equality's name on it. We must reach a point where it is accepted that a backbencher with a good idea can progress a Bill through this House on its own merits.

This Bill is designed to alleviate the hardship and suffering of thousands of families in this country who, in most cases through no fault of their own, got themselves into financial difficulty, egged on by the banking institutions. It is very important that this Bill be enacted as soon as possible. The fact that it has been so difficult to deliver points to the need for greater influence from the floor of this Chamber. It also points to the very important role that the Labour Party plays in this institution. It is important that a party driven by an ideology which demands equality for people is well represented in this Parliament, both now and in the future.

I congratulate Deputy Penrose and thank the Minister for Justice and Equality for bringing forward this legislation and I hope that the lives of many people - this Christmas and thereafter - will be greatly eased by it.

The next speaker is Deputy Joe O'Reilly, who is sharing time with Deputies Seán Kyne and Regina Doherty.

I congratulate my good friend and colleague, Deputy Willie Penrose, on his courageous and far-seeing work. He pioneered the Bill which is his achievement. He has been working on it for a long time and brought all of his professional skills to it. Well done to him for this reforming and excellent legislation.

There are three reasons the Bill is good. First, it will encourage creditors and banks to engage more with debtors in voluntary arrangements. This will be its greatest achievement in that the banks, faced with the prospect of having to allow bankruptcy, will engage with people in a meaningful and proactive way and people will have a chance to restructure loans and work them out. Second, it will reduce bankruptcy tourism. Where I live along the Border there are many people who travel to Northern Ireland to be declared bankrupt. There are also many people who travel abroad. Third, the Bill will allow people a second start. This is very much part of the culture in America and other countries in that people who fail once are not deemed to be a lifelong failure. The likelihood is that their failure will educate and give them the wherewithal to succeed a second or third time. The risk is that the Bill will make bankruptcy an attractive option, but it never will be. In a small country like Ireland people will for trading purposes try to avoid bankruptcy and the opprobrium that goes with it. The disincentive to enter into bankruptcy remains but the advantages to be gained in getting people out of it quickly will be achieved.

It is a great achievement on the part of Deputy Willie Penrose to pioneer the Bill which will have massive advantages for the economy in future years. I support it and applaud my colleague for his pioneering work.

Tá áthas orm cúpla focal a rá maidir leis an mBille seo. Déanaim comhghairdeas leis an Teachta Penrose agus chuile dhuine a bhí páirteach sa phróiseas seo, go mór mór baill an Chomhchoiste um Dhlí agus Ceart, Cosaint agus Comhionannas.

I welcome the Bill and commend Deputy Willie Penrose and all those involved, in particular the justice committee. Some 80% of the 135,000 jobs created by entrepreneurs were created in Irish SMEs. Fostering entrepreneurship is a very important part of job creation, as is acknowledging failure. People can sometimes make mistakes and things do not always work out. My old accountancy teacher used to say we should never be ashamed to fail in business. A punitive bankruptcy regime does not foster job creation. The Bill provides sanctions for those who evade their responsibilities and do not co-operate in the bankruptcy or conceal income or assets from creditors. It is important that it not be an easy process and that it be monitored. Entrepreneurs will be encouraged to develop new and existing businesses and the Bill may also help in dealing with the psychological issues and stress caused by the process of indebtedness. We have all come across this in our constituencies in dealing with the problems faced by homeowners.

The legislation is certainly very welcome. I commend all those involved, including the Government, for bringing it to this stage. In particular, I acknowledge Deputy Willie Penrose for the work he has done on it. I commend it to the House and wish it success.

This occasion is poignant for me because it might be my last chance to speak in the House before Christmas. I have to say how genuinely I admire my stubborn colleague in the House because, for me, this is probably the most significant legislation we will have passed in the past five years and there has been some powerful legislation enacted in that time. I am very grateful to Deputy Willie Penrose for tenacity and stubbornness which have ensured the Bill is before us in order that we can vote on it.

We have had discussions on this issue before. As a Deputy for the past five years, one of the most difficult things I have had to do on behalf of constituents is deal with banks, the left arm of which does not know what the right arm is doing. I am being gracious in saying this because some of the more sinister elements of the activities of banks in some cases are tantamount to illegality. One State-owned bank will be before the Circuit Court on 26 January to deal with allegations that it hired private investigators and illegally bought information from State bodies. Some of their activities are despicable. The Bill will give people an opportunity to have some breathing space to take care of their debts. They are probably in debt through no fault of their own. I do not often agree with Deputy Peter Mathews, but I agree with what he said today. It does not matter what the cause of the debt is; what matters is that the outcome for everybody and what is wanted by Members of this House is recovery. This legislation will give tens of thousands of people an opportunity to seek recovery and I wholeheartedly commend it. I say, "Well done" to Deputy Willie Penrose.

I, too, commend Deputy Willie Penrose on the work he has done on this Bill, about which we had very long conversations at different stages. In his contribution he mentioned the kitchen table. Very good ideas often come from it and often some very strong family decisions are made at it. The ideas expressed in the conversations that took place at that kitchen table found their way into the legislation, for which I commend the Deputy, as well as for his hard work.

I also thank the justice committee for the work it has done in this regard. It reviewed a significant number of submissions in a very speedy manner. I thank all Members of the House. It is a mark of the quality of the Bill and the co-operation received from Independent Members and all of the major political parties that the legislation has been dealt with in such a speedy manner. That a sense of hope and relief will be given to those in bankruptcy will strengthen the hand of those individuals in financial distress.

Many Members mentioned the element of stigma attached to bankruptcy. Bankruptcy is always hard on the individual and his or her family. It is always a hard decision to enter it. Even with this Bill, no one will make a decision to be declared bankrupt easily. It is a very stressful time. Deputy Willie Penrose has mentioned the impact it has on families. There is no shame in it because the only shame is in not trying. We should ensure those who try to set up a small business will have an opportunity to try again if they are unfortunate enough to go bankrupt. We have to make sure we develop an economy that assists entrepreneurs. If they are unfortunate enough to go bankrupt or run into economic problems, they should be in a position to try again. Deputy Willie Penrose and many other Members of the House have reminded us about the many people who went bankrupt in other societies but came back and built thriving businesses that employed many thousands. I have no doubt that unfortunate investors and entrepreneurs who have gone bankrupt will come back, reinvest in the economy and once again give great hope.

The reduction in the bankruptcy term from three years to one is very significant. It is a fundamental change which follows the recommendation of the Joint Committee on Justice, Defence and Equality. I again pay tribute to it for its work under its Chairman. The change will ease the impact of bankruptcy on individuals who have been struggling with unsustainable debt on a much reduced income for several years. The provision for the revesting of the family home where it has not been sold within three years is another practical and humane solution. on which Deputy Willie Penrose and other Members remarked in their contributions.

While I do not have time to deal with all of the contributions made, one point that is significant is that people - 135,000 - are going back to work. This is where I disagree fundamentally with Deputy Peter Mathews. It is not a fig-leaf for any family that a family member has gone back to work. We inherited a situation where 500,000 people, or 15.1% of the working population, were unemployed, but the figure is now back below 9%, which is significant. We have rebuilt a crashed economy. Today we will launch 79 new social housing units.

Tonight, Dublin City Council will announce 1,300 new developments in the city alone.

I agree society faces many challenges. The provision of housing is a significant challenge, as is improving the health service. However, the main challenge faced over the past five years has been the economy and the need to get people back to work. That issue had to be addressed and the Government has done that. I thank the Chair for allowing me this time.

Question put and declared carried.