Dáil Éireann Debate, Wednesday - 24 October 2012
181. Deputy Stephen S. Donnelly asked the Minister for Justice and Equality with regards to the Personal Insolvency Bill, if he will consider shortening the duration of bankruptcy and voluntary debt settlement agreements to two years, for a limited period, in order to clear the household debt overhang at a minimal social cost; and if he will make a statement on the matter. [46863/12]
View answerI appreciate the sentiments behind the Deputy's proposal in seeking to consider the best approach to the duration of the debt resolution arrangements to be provided under the Personal Insolvency Bill 2012. However, I could not consider at this point, such a radical shortening as the Deputy proposes of the various durations of the debt resolution arrangements as contained in the Bill. I do not believe that it would achieve a broad desirable outcome as he suggests.
The Personal Insolvency Bill 2012 provides for three new, essentially non-judicial debt resolution processes. The Debt Relief Notice provides, where approved, for an immediate write-off of qualifying debt up to €20,000, though the debtor is subject to a supervision period of 3 years. The Debt Settlement Arrangement provides for the negotiated and agreed resolution of unsecured debt only. There is no limit on such debt and the Arrangement should not normally exceed 5 years in duration. The Personal Insolvency Arrangement provides for the negotiated and agreed resolution of both secured debt - up to a limit if €3 million - and unsecured debt where there is again no limit. The Personal Insolvency Arrangement which is a significant and unique approach to seeking to deal with indebtedness should not normally exceed 6 years.
The significant reform which the Bill provides for in regard to the judicial bankruptcy process is that there shall be automatic discharge from bankruptcy after 3 years, as opposed to the current 12 years. This reduction is I believe a proportionate response in the context of this judicial process and is consistent having regard to international comparisons, though I appreciate not necessarily that of our neighbouring jurisdiction. Again, I would reiterate that bankruptcy is a process not be entered into lightly.
The provision in regard to the Debt Settlement Arrangement mirrors similar time frames allowed for the settlement of unsecured credit in other common law jurisdictions. It permits a reasonable time period for the debtor to make payments to creditors and to receive the likely discount on his or her debts. Thus, creditors and debtors enter, following negotiation, into a consensual arrangement to resolve debt issues relating to unsecured debt. In circumstances where, at the end of the period, a significant amount of the debt will be written-off, there must be some incentive for creditors to enter into such an agreement. The Deputy's proposal to shorten the period to 2 years would make it very difficult to facilitate the conclusion of an arrangement in most cases. It is also counterproductive in that it would present a major disincentive to creditors ever agreeing to a settlement. There must be a facility, within a specified time line, for some payments to be made.
Likewise in the Personal Insolvency Arrangement, which covers both secured debt and unsecured debt, and is a quite unique proposal not yet replicated elsewhere. I believe that the normal period of 6 years duration is of reasonable length for the debtor to fulfil the terms of the arrangement. The terms of the arrangement may include significant debt write-offs by creditors, including in regard to the debtor's principal private residence. There must be a reasonable period of time during which the arrangement remains in place so that some portion of the debt is discharged. During this time, the debtor continues to live in their home. The new debt resolution processes are designed to provide a viable alternative for most debtors and creditors to petitioning for judicial bankruptcy. They are designed to be attractive to all parties concerned and to provide the optimal outcome in regard to the broader economic and social perspectives.
