I thank the Chairman and members of the joint committee for inviting me. I look forward to the opportunity to answer as many questions as I can from members, but before doing so, I wish to give them a brief overview of the work undertaken following the establishment of the Insolvency Service of Ireland, otherwise known as the ISI, including an update on our current targets and when we believe we will be in a position to accept initial applications for relief as part of the new debt solutions introduced under the Personal Insolvency Act. Having done so, I will highlight a number of points on why these new reliefs introduced under the Act are both necessary and have the potential to be a very important response in addressing the overall problem of personal debt that we as a country face.
Since my appointment as director designate of the ISI at the end of October last year, a number of key milestones have been passed. These include the enactment of the Personal Insolvency Bill at the end of December last year; the formal establishment of the ISI in March this year by the Minister for Justice and Equality; the launch of the ISI information campaign in April this year; and the publication in June this year of regulations governing the authorisation of personal insolvency practitioners and approved intermediaries - the people who will actually offer face-to-face advice and assistance to insolvent debtors.
In addition to these key milestones, in establishing itself the ISI has also met a number of organisational targets which I have set out in some detail in my statement and which I will summarise for the committee. They include the following: the development of a business plan; the recruitment of staff; the identification of offices for the organisation; the identification of necessary amendments to the legislation; the putting in place of the corporate governance structures one would expect an organisation of this type to have in place; the development of ongoing stakeholder engagement, given that it is important we speak with all stakeholders, of which there are many, to try to ensure as best we can that these new arrangements will work; the development of guides for members of the public in order that they understand what is involved; the development of a website and information line; and the roll-out of various courses for personal insolvency practitioners and approved intermediaries.
We have also carried out in-depth research and published guidelines on reasonable living expenses, as required under the legislation. In addition, we have scoped out what will ultimately be a very significant IT system to ensure we operate the new arrangements in an efficient and effective manner. We have been working on the development of an extensive list of the documentation required of us under the Personal Insolvency Act which, for example, includes the prescribed financial statements and various application forms. In doing our best to meet all of these targets my team and I are acutely aware of the importance of being in a position to accept applications for these new debt reliefs as soon as possible. I have no doubt that there are very many cases across the country in which people find themselves unable to pay their debts, often through no fault of their own, and are waiting for the ISI to open its doors in order that they can finally deal with their debt problems which until now may have appeared insurmountable to them.
When I speak to my counterparts in the Insolvency Service of England and Wales, the Insolvency Service of Northern Ireland or other organisations in other jurisdictions, they speak to me in terms of years when referring to their experiences in setting up an organisation such as this, or even in rolling out a new service within their existing business. I have a somewhat similar conversation with those involved in the regulation of persons practising in the financial services area who, again, talk in terms of years rather than months. However, notwithstanding these facts, I am pleased to confirm that the ISI, following its establishment in March, hopes to be in a position to accept applications in mid-August. For that to happen, however, three things need to occur before then. First, the ISI needs to begin authorising practitioners and approved intermediaries. We hope to begin this process by the end of July. Insolvent debtors will then be able to meet authorised practitioners straightaway. However, I do not want to create false expectations. It is likely to take a number of weeks before we reach a critical mass of practitioners throughout the country.
Second, the ISI needs to have its IT system fully operational. This system has been developed by the IT division of the Department of Justice and Equality and I have been assured that the entire system will be handed over to the ISI by the end of this week for complete end-to-end testing which will involve the assistance of the MABS, potential practitioners and the Courts Service. Any delay in the hand-over of the system will have a knock-on effect on the date on which we can begin to accept applications.
Third, we need the remaining provisions of the Personal Insolvency Act to be commenced, together with the passing and commencement of various amendments contained within the Courts and Civil Law (Miscellaneous Provisions) Bill. I understand these amendments should be commenced shortly. I also understand the Courts and Civil Law (Miscellaneous Provisions) Bill passed all Stages in the Dáil this morning.
All of this should mean that the first debt relief notices will begin to issue in early September this year, as will the first protective certificates that will cover those applying for a debt settlement arrangement or personal insolvency arrangement. As the committee will be aware, the debt settlement arrangement and the personal insolvency arrangement process is a two-stage process. At stage one the protective certificate offers a 70-day window for practitioners to develop a proposal to the satisfaction of the debtor and creditors. This should mean that the first debt settlement arrangement or personal insolvency arrangement will issue during November this year, approximately 70 days after the first protective certificate is issued.
It is worth pointing out that when the protective certificate is issued at the beginning of September, debtors will be protected from any action creditors subject to the protective certificate may be inclined to take about the arrears they are owed.
I wish to turn to the debt reliefs and why they should play an important role in helping insolvent debtors to deal with their difficulties. The first arrangement is a debt relief notice which will allow for the write-off of qualifying debt up to €20,000, subject to a three year supervision period. This is primarily designed for those with very little income and very few assets. Approved intermediaries will advise debtors applying for a debt relief notice and will primarily be available through MABS offices throughout the country. The features of the debt relief notice are very similar to those which apply to debt relief orders which have operated successfully in the United Kingdom for several years.
The second arrangement introduced by the new Act is the debt settlement arrangement which provides for the agreed settlement of unsecured debt, with no maximum or minimum limits involved over a period normally expected to be five years. Once again, similar solutions are available to insolvent debtors in other jurisdictions which work efficiently in addressing debtor and creditor issues. The success of the individual voluntary arrangement schemes in the United Kingdom which are broadly similar to the debt settlement arrangement here gives me confidence that it will be a success.
The third and final arrangement, the personal insolvency arrangement, will facilitate the restructuring or settlement of secured debt of up to €3 million, a cap which can be increased with the consent of all secured creditors, and the settlement of unsecured debts without limits, over a period normally expected to be six years. To my knowledge, this arrangement goes further than those available in other jurisdictions in that it addresses secured debt. Given the difficulties the country faces with property debt, such a feature is essential.
There has been much speculation as to whether this arrangement will be a success or whether banks shall choose to vote against many proposals developed through the process. I stress that the debt settlement arrangement and the personal insolvency arrangement are voluntary, designed to take into account the interests of a debtor and his or her creditors. It is likely that in the vast majority of cases a practitioner will be able to make a proposal that is in the interests of the debtor and the creditor. The reality is that these new arrangements offer an efficient and an effective means to tackle problem debt in a controlled manner short of bankruptcy. While security is recognised in bankruptcy, the reality is that in the vast majority of cases bankruptcy is bad news for the creditor. It is costly and, in almost all cases, likely to crystallise negative equity in full.
With regard to bankruptcy, as the committee is aware, the Personal Insolvency Act contains provisions to amend certain elements of the Bankruptcy Act 1988, the main change being the introduction of an automatic discharge from bankruptcy after three years rather than the 12 years which applies at present. I expect these provisions to be commenced shortly.
The committee is also aware that the Courts and Civil Law (Miscellaneous Provisions) Bill contains provisions for the transfer of the Office of the Official Assignee who, in effect, manages all bankruptcies to the Insolvency Service of Ireland. The official assignee has been working closely with the ISI in recent months to ensure his office, once transferred, will have sufficient resources to deal with the significant increase in bankruptcies envisaged in the coming months and years. More than one third of all ISI staff will work for the official assignee, which will result in an almost fourfold increase in its current staffing levels. The ISI will issue a tender by the end of this week for the development of a specific IT system to support the needs of the official assignee, given the anticipated increase in the number of cases.
We are only a number of weeks away from the Insolvency Service of Ireland being in a position to accept applications for the new debt reliefs. Insolvent debtors will be in a position to begin meeting authorised personal insolvency practitioners, or PIPs, and approved intermediaries at the end of this month. The new debt reliefs are not just good for debtors; they are also in the interests of creditors, by offering an efficient and fair means to tackle what is a very large problem for everyone. Ultimately, it is in all of our interests to return insolvent debtors to solvency to ensure their well-being and give them the second chance they deserve.
I am happy to take questions committee members may have.