Personal Insolvency Bill 2012: Report Stage (Resumed) and Final Stage

Deputy Niall Collins

I move amendment No. 131:

In page 75, line 2, to delete “3 years” and substitute “2 years”.

Question, "That the words proposed to be deleted stand", put and declared carried.

Amendment declared lost.

Deputy Niall Collins

I move amendment No. 132:

In page 75, line 30, to delete “5 years” and substitute “1 year”.

This pertains to section 85 which provides that the Minister shall, in consultation with the Minister for Finance, not later than five years after the commencement of the chapter, commence a review of its operation. The amendment seeks to have the review take place a year after the legislation is commenced, for obvious reasons.

Minister for Justice and Equality (Deputy Alan Shatter)

The amendment would reduce the period of commencement of a review of the operation of a personal insolvency arrangement under the legislation from five years to one year. This would be the statutory requirement for a review. I have examined the issue of the length and scope of a review period and had hoped to be in a position to bring forward an amendment on the matter today. However, I intend to introduce an amendment in the Seanad providing for a review after three years. That would apply to all the new insolvency processes under the Bill. I assure the Deputy that whereas the statutory review will be after three years, it is my intention to keep the legislation under continuing review. As I have said, I will look at how the legislation is operating after the first year and if amendments are required, we will not be delayed in any way by a statutory review.

The statutory review will probably be a look back at how the legislation operated over a period of years. The original idea was that it would be five years, but I believe reducing it to three years is appropriate. It will provide an opportunity for us to get past teething issues that might arise under the legislation and to see how it works in practice. A formal statutory review after one year would not necessarily give us that information. Indeed, after one year we might find, on the basis that it will take people a little while to become familiar with the legislation, that there could be many arrangements under discussion that have not been finalised. The formal statutory review would be too early after a one year period. Three years is reasonable. I assure the House that I and the Government will keep a watchful eye on how this legislation works. If it becomes apparent that some aspect of it is creating a difficulty or could be modified in a constructive, fair and balanced manner to ensure the legislation works as intended, there is no question of waiting three or five years to take the appropriate action.

In that context, perhaps the Deputy will consider withdrawing the amendment.

Deputy Niall Collins

I accept the Minister's comments on my proposal of one year versus the proposed three years he intends to provide for in the Seanad. When he is making the provision for three years, will he put a time limit on the review period? Will the review period start in year three or will it finish in year three? Can the Minister provide for a definite period of time for the review in order that it will not be an open-ended exercise that might drag on? I will withdraw my amendment on that basis.

Deputy Alan Shatter

The intention would be that the review period would commence after the legislation has been working for three full years. I accept what the Deputy says. We do not need a review period that takes, for example, a further 18 months. If there is a statutory review period, the insolvency agencies, personal insolvency practitioners, the money advice and budgeting service, MABS, free legal advice centres, FLAC, or anybody with experience of the working of the legislation will know the review will start at the end of year three and will be able to do preparatory work to examine the working of the legislation critically and constructively. I will give consideration to requiring not only that the review commences at a particular point but that the outcome of the review and any recommendations derived from it will be published within a specified period.

I want to give some thought to what the period will be. It may be that it is to be published no later than, for example, six months or whatever period is appropriate. If the review is completed earlier, there will be no blockage on its publication. It is desirable not to be in a position where a review commences one year and we do not know the outcome for 18 months. That would be counterproductive and would defeat the purpose of the three-year review.

Deputy Stephen S. Donnelly

In the same vein, I have no doubt the Minister and his officials will watch this like hawks. In order that the Oireachtas committee can see how this is working, as opposed to the Minister and his officials, can the Minister consider coming before the committee or the Chamber with some initial data? For example, these could include the number of debt surrenders, the number of people who have engaged in the various processes and some case studies. Precedent will quickly be set and a small number of case studies will probably account for 80% of the people. I ask the Minister to consider returning with some data for us to consider within a year.

Deputy Alan Shatter

That will happen without me needing to do anything further. It is envisaged that the insolvency agency will produce an annual report, which will be laid before both Houses. It is open to the Joint Committee on Justice, Defence and Equality to engage with the content of the report, to hear from the head of the insolvency agency if it wishes and to conduct any further hearing or inquiry it feels is appropriate. The committee, independently of me as Minister and of the Government, can review how things are going and the publication of an annual report from the insolvency agency will be of assistance in that context.

I assume the insolvency agency will be able to produce information on the number of debt settlement arrangements and personal insolvency arrangements furnished to the courts, the number approved by the court and where difficulties arose. On the other side, the Courts Service in its annual report, will replicate the information. Through the Joint Committee on Justice, Defence and Equality, the House will be in a position to do that work. It is desirable it does so.

Amendment, by leave, withdrawn.

Acting Chairman (Deputy Terence Flanagan)

Amendments Nos. 133, which arises out of Committee proceedings, and 138 are related and may be discussed together.

Deputy Pádraig Mac Lochlainn

I move amendment No. 133:

In page 76, line 47, to delete “€3,000,000;” and substitute “€1,000,000;”.

Personal insolvency legislation should be to assist people struggling with personal debt concerning family homes, non-commercial investments and pension provisions. It should not assist commercial investors. The reference in the Bill to debts exceeding €3 million is intended to capture buy-to-let landlords. The ECB, the IMF and a range of academic experts argued that this is too high and must be lowered. A sum of €1 million is sufficient to capture all of those with significant personal debt. This is one of the core issues in the Bill we have a problem with and I ask the Minister to accept the amendment.

Deputy Niall Collins

The legislation refers to a figure of €3 million. Can the Minister give us an insight into how he arrived at the figure of €3 million? If one had an average mortgage in the region of €250,000-€280,000 and if we add in issues of personal debt, one could also add the mortgage of a buy-to-let property and still come up short of €1 million. A ceiling of €1 million captures the vast majority of people.

There is uncertainty in respect of the ECB. Did the Minister have discussions on the issue with members of the troika when they were in town recently? What did the members of the troika say about this? Another troika opinion is due on the matter but may not be published until next week. FLAC highlighted this as an issue and it is correct in saying that no reasons have been provided for the figure of €3 million. At the same time, no concrete reasons have been given for the ECB recommendation to reduce the figure to €1 million. Perhaps the Minister can enlighten us on how he came up with the figure of €3 million. Fianna Fáil will support the reduction of the limit from €3 million to €1 million.

Deputy Richard Boyd Barrett

I add my support and the support of the United Left Alliance for this amendment. We should all be on the same page, that the purpose of the legislation is to lift the burden of unsustainable debt from the backs of ordinary people who found themselves in difficulty through no fault of their own, simply because they were trying to put a roof over their heads in a market that had gone out of control. Those people deserve relief. It is right that legislation should be passed to offer them some relief. It is also reasonable that people who, in many cases, were actively encouraged by their banks and by advertising on television at the time to invest, to buy investment property for old age or to put their savings away, might have bought one property to let. It is reasonable to offer those people some relief. Such people are not big speculators and all of those people are captured by the threshold of €1 million. Above the threshold of €1 million, I do not see how we are talking about anyone other than professional speculators, who were speculating in the property market hoping to make large profits from the crazy property bubble that had developed and speculation in land and property. They were borrowing crazy amounts of money to pump up the bubble and I do not see any moral or economic justification for giving such people relief. I am interested to hear why the threshold is set at €3 million. Most people feel the ordinary housebuyer and the person who is doing reasonable things but was caught up in the extraordinary situation that developed during the boom, should get relief. The idea that speculators or those who were looking to profit from the market in a big way should get relief is not acceptable to most people. Legislation should not be used to provide relief to such people. I urge the Minister to accept the amendment and, if not, to give some explanation as to why not.

Deputy Alan Shatter

I thank the Deputies for their contributions. I propose to respond to amendments Nos. 133 and 138 together. Both amendments propose to reduce the indicative limit for the aggregate amount of secured debt that may be proposed in a personal insolvency arrangement from €3 million to €1 million. It is the preferred approach of the financial institutions so it is rather interesting to see some of the Deputies speaking, who normally excoriate the financial institutions, on their side. I am not saying that as a smart remark because the Deputies may not realise it. There has been a misunderstanding about this mechanism and why it is proposed.

The Deputy's proposals may be based on some comment of the troika, and this was raised. Such comments, in so far as any were made, were based on a complete misunderstanding of the innovative debt resolution proposals contained in the personal insolvency arrangement. This arrangement provides a rescue approach as opposed to the classical liquidation approach in bankruptcy. The Deputy is proposing that someone who has debt exceeding €1 million should be put into bankruptcy, even if using this mechanism would result, over a period of years, in creditors recouping a larger portion of the money due to them.

What we propose is not a simple option. Deputy Boyd Barrett is right. One of the important aspects of the option is to provide a mechanism whereby people who are living in what I describe as reasonable homes based on their family needs and requirements, and not mansions, are given the opportunity, instead of going into bankruptcy, to retain their homes and recalibrate their debts. That is a major objective of this measure.

We are providing an alternative to putting people in bankruptcy. Why is bankruptcy not, necessarily, the best alternative? First, because it means the official assignee will sell all the bankrupt's property to realise value. Consider a business person who has a family home that is worth €400,00 or €500,000, has borrowings of €300,000 or €400,000 and is running a small business that is going reasonably well but requires liquidity from his bank. He borrows €400,000 or €500,000 from the bank, which brings him above the €1 million limit but he has a viable business and his financial difficulties are the result of the economic collapse, perhaps some customers have not paid him for a product or service. If the business can continue it will preserve the jobs of employees. Are we saying that individual, because the debts are personal and not corporate, should be thrown into bankruptcy, the business terminated and the employees rendered unemployed, or do we use the personal insolvency arrangement, which is a form of personal examinership? A limited liability company in financial difficulty can go into the courts and if it can be proved that with debt restructuring the business can become viable, the indebtedness worked through and some accommodation afforded by creditors, the limited liability company can continue. Why should that arrangement not be available for an individual whose debt exceeds €1 million?

Some Deputies may see this as providing an easy mechanism for speculators, and it has been misunderstood in that way. The word "speculator" is interesting. It means that anyone who has invested in anything, and was fortunate enough to get funding to invest in something worth more than €1 million, is a speculator. It might just be someone who saw a business proposition or, indeed, may have invested in property. The Deputy from Dún Laoghaire will have many constituents who may own a reasonable family home and were persuaded by their bank, in 2003 or 2004, to borrow €750,000 to buy one of the apartments being built up the road to provide a nice pension. Those same people may have a €300,000 mortgage on their own home and suddenly find that the property for which they borrowed €750,000 is now worth €300,000 and their home which was in positive equity is now just about equal to the borrowings on it. They are in financial difficulty because they cannot keep up their mortgage repayments. Are we to say to those people they must go into bankruptcy because they have debts of more than €1 million?

The provision is more sophisticated than that. The Bill provides an alternative mechanism to bankruptcy which should, and I hope will, assist people who are in homes with negative equity, but which are appropriate and not over-elaborate, and who have other indebtedness and just cannot pay, as opposed to will not pay. The measure will help to restructure their positions.

This is insolvency legislation. It does not just deal with mortgage and the family home. It applies across a broad range of areas to put in place facilities whereby recalibrating someone's finances will, over a period of years, make them financially viable and will also assist them in meeting their obligations to pay their debts. That is what it refers to.

Let us consider the buy-to-let sector. Some people borrowed insane sums of money from banks, who were throwing it at them. Deputy Boyd Barrett and I frequently disagree on issues, but I agree with the Deputy that people had choices. Some people bought multiples of apartments, thinking they were going to make a financial killing because prices were going to continue to go up, and many were encouraged by banks to have that view. Others did it because they saw it as a way to generate security for themselves many years in the future without putting money into pension schemes, for example. They were buying things they could not afford to buy. If they had put money into pension schemes arising from their employment they might have put €5,000 or €10,000 a year into a scheme. Suddenly, banks were offering half a million for an apartment and another half a million for another apartment. It did not matter that they were putting nothing into it.

A number of individuals in that situation are, I presume, engaging with the banks and meeting their obligation to pay. Inevitably, there are some who will go to into bankruptcy. What happens when they go into bankruptcy? Possession is taken of their property and of their family home, the bank sells it off and, because of the collapse in property prices, realises only a portion of what is due to it.

In the process we are putting in place, there are judgments to be made. A financial institution may take the view that a personal insolvency arrangement may not recoup as much as it should but it might, over a period of years, recoup some of what it lent. Bankruptcy might be easier for some people in those circumstances. There is a perception that the personal insolvency arrangement is some sort of lifeboat for people in that position. It certainly allows restructuring. However, for someone in that position with those sort of properties, bankruptcy may be the probable route. First, it may not be possible to recalibrate their finances in a way that would result in reasonable repayments. Second, if they go into bankruptcy they will exit eventually from the indebtedness which they might have to continue to meet through a personal insolvency arrangement.

This arrangement provides for a rescue approach, as opposed to the classical liquidation approach in bankruptcy. The rescue approach is designed not only for home mortgages, no matter how important that is and it is hugely important, but for all types of debt where a security is involved. It will include viable or potentially viable small trader type businesses whose continued existence can sustain employment and economic activity.

The limit of €3 million is not the critical element here. When the Select Committee on Justice, Defence and Equality dealt with the Bill and gave consideration to the true implications of how it would work, members suggested that if there had to be a limit it should be €10 million, because this was seen as a way of working through debt and not evading it, which bankruptcy can be to those who simply cannot meet their obligations. To a large degree, the figure of €3 million is an indicative figure to assist the approach of debtors and creditors in considering their options. There is the alternative option of bankruptcy. Secured creditors can consent not to apply the €3 million limit, by agreement. Why would a secured creditor do that? It is because they would see it as advantageous to recoup money due to them as opposed to the alternative option of a debtor going into bankruptcy.

This is not an easy option. I was asked one morning on Newstalk to explain the €3 million provision in one line. The interviewer got very stressed when I said it could not be explained in one line because a one line explanation is impossible. We are providing an alternative to the liquidation approach of bankruptcy. This is a useful option for those trying to put together workable debt resolution. If 65% of creditors do not agree to a proposal, however, it cannot be put in place. If we reduced the amount, as the Deputy suggests, it would not be long before I would be faced with requests to increase the amount to ensure personal insolvency arrangements actually work.

The sad reality is there are many individuals who might have personal indebtedness of more than €1 million who would not fall into the caricature category of the property speculator, an evil incarnate equivalent to the banking institutions. This issue has been misunderstood and the nature of the mechanism has been misunderstood. The €3 million is like a headline figure that appears to mean someone who has borrowed that amount is getting off easily so it must be bad. That is the depth of analysis that has been done when the reality is much more sophisticated. There are individuals in debt to that extent who, provided they are not concerned about the family home, would prefer the bankruptcy option. That is the reality.

At European Union level a new instrument is being considered to deal with insolvency and bankruptcy and to look at non-judicial alternatives to bankruptcy. There has been substantial European engagement with the Department on what we are doing in this area. I do not know to what extent what we are doing here might be taken on board by the European Commission in its proposals for insolvency that will apply across the European Union but in either December or January it will announce proposals and I know the Commission is interested in the non-judicial debt restructuring alternatives to bankruptcy that we are proposing.

I appreciate that looked at superficially a person would wonder what we are doing and where the €3 million figure came from. I was working on the assumption that this would be misunderstood from the start and it would be difficult to explain. There is an argument for this to be completely open-ended. If we take a company that is insolvent, under company law, it might be wound up or there might be a voluntary or creditors' liquidation, it might go into receivership or the company might apply to the courts for examinership. This is an attempt at an agreed examinership process. It is not court imposed and it will facilitate an individual in debt difficulty to avoid bankruptcy and will give creditors reason to engage and consider if the mechanism will offer a greater possibility of recouping some of what is owed than would otherwise be the case.

For people in difficulties with the family home, this has the added advantage that in bankruptcy, the home is sold while under this mechanism it is not. With this mechanism, however, if a home is an elaborate mansion that is substantially beyond a reasonable property to live in by way of a family home, creditors will not agree that it will not be sold and the protections provided under the legislation do not apply because of how we have addressed the family home issue.

Deputy Pádraig Mac Lochlainn

That was a long and spirited defence of the position but if people analyse the debate yesterday and today, they will see discussions of the value of engagement rings and wedding rings and being able to retain cars to the value of €1,200, even though that is a farcical idea in vast areas of this State. The public's view is that this legislation is a compassionate response to a swathe of people who purchased homes and took on debt in good faith. They listened to politicians and economists, so called experts, and took that plunge. The banks, as we all know, had the moral hazard, from the bank manager to the boards of directors. We agree that this Bill would allow for a compassionate response that would enable people in those circumstances to get themselves out of this situation. Today we were told we must be tough and think about the creditors, we must keep the car value down and the engagement ring must come from a lucky bag. All of a sudden, however, we must be more compassionate for those who were investing and who took on board much more than the vast majority of people did to put a roof over their heads.

Deputy Alan Shatter

I have already said that it is easy to present it that way.

Deputy Pádraig Mac Lochlainn

There must be consistency in how we convey the intent of the Bill to the public and I doubt it will see consistency in what is being presented here. The Minister has not explained his decision.

An Ceann Comhairle

The Deputy's time is up.

Deputy Pádraig Mac Lochlainn

The Minister gave a long and spirited defence of his position.

An Ceann Comhairle

There is a limit of two minutes on Report Stage.

Deputy Pádraig Mac Lochlainn

I will conclude. The Minister was invited by Deputy Collins to outline the rationale for the €3 million provision. People will ask where this figure came from when we are debating whether people will be allowed to keep their engagement rings or own a car that will take them from one town to another. There must be consistency and I urge the Minister to reduce the €3 million considerably.

Deputy Niall Collins

The perception exists, rightly or wrongly, that by setting the limit at €3 million, many high net worth individuals will be facilitated instead of having to go through bankruptcy. If a person enters into a PIA, and the arrangement is approved by the courts and the insolvency service, does the information become public or does it fall under the veil of secrecy that currently pertains for banking arrangements?

Deputy Richard Boyd Barrett

In the cordial spirit we are discussing this, the Minister has made some reasonable points about the threshold.

Deputy Stephen S. Donnelly

The Minister should enjoy this while he can.

Deputy Alan Shatter

It is getting close to Christmas.

Deputy Richard Boyd Barrett

Only Deputy Mac Lochlainn is entitled to speak again, if he wishes.

Deputy Pádraig Mac Lochlainn

No, I do not.

Question put: "That the figure proposed to be deleted stand."

The Dáil divided: Tá, 92; Níl, 34.

Tá

Bannon, James.
Barry, Tom.
Boyd Barrett, Richard.
Breen, Pat.
Butler, Ray.
Buttimer, Jerry.
Byrne, Catherine.
Byrne, Eric.
Carey, Joe.
Collins, Áine.
Conaghan, Michael.
Conlan, Seán.
Connaughton, Paul J.
Conway, Ciara.
Coonan, Noel.
Corcoran Kennedy, Marcella.
Creed, Michael.
Daly, Jim.
Deasy, John.
Deenihan, Jimmy.
Deering, Pat.
Doherty, Regina.
Donnelly, Stephen S.
Dowds, Robert.
Durkan, Bernard J.
English, Damien.
Farrell, Alan.
Feighan, Frank.
Fitzgerald, Frances.
Fitzpatrick, Peter.
Flanagan, Terence.
Gilmore, Eamon.
Griffin, Brendan.
Halligan, John.
Hannigan, Dominic.
Harrington, Noel.
Harris, Simon.
Hayes, Brian.
Hayes, Tom.
Healy-Rae, Michael.
Heydon, Martin.
Hogan, Phil.
Humphreys, Heather.
Humphreys, Kevin.
Keating, Derek.
Keaveney, Colm.
Kehoe, Paul.
Kelly, Alan.
Kenny, Seán.
Lawlor, Anthony.
Lynch, Ciarán.
Lynch, Kathleen.
McEntee, Shane.
McHugh, Joe.
McLoughlin, Tony.
McNamara, Michael.
Maloney, Eamonn.
Mathews, Peter.
Mitchell, Olivia.
Mitchell O'Connor, Mary.
Mulherin, Michelle.
Murphy, Catherine.
Murphy, Dara.
Murphy, Eoghan.
Nash, Gerald.
Neville, Dan.
Nolan, Derek.
Noonan, Michael.
Nulty, Patrick.
Ó Ríordáin, Aodhán.
O'Donnell, Kieran.
O'Donovan, Patrick.
O'Reilly, Joe.
O'Sullivan, Jan.
Penrose, Willie.
Perry, John.
Phelan, Ann.
Phelan, John Paul.
Pringle, Thomas.
Reilly, James.
Ring, Michael.
Ryan, Brendan.
Shatter, Alan.
Sherlock, Sean.
Spring, Arthur.
Stagg, Emmet.
Stanton, David.
Timmins, Billy.
Tuffy, Joanna.
Wall, Jack.
Walsh, Brian.
White, Alex.

Níl

Broughan, Thomas P.
Calleary, Dara.
Collins, Joan.
Collins, Niall.
Colreavy, Michael.
Cowen, Barry.
Crowe, Seán.
Daly, Clare.
Doherty, Pearse.
Ferris, Martin.
Fleming, Sean.
Fleming, Tom.
Healy, Seamus.
Higgins, Joe.
Kirk, Seamus.
Kitt, Michael P.
Mac Lochlainn, Pádraig.
McConalogue, Charlie.
McDonald, Mary Lou.
McGrath, Finian.
McGrath, Michael.
McGuinness, John.
McLellan, Sandra.
Moynihan, Michael.
Ó Caoláin, Caoimhghín.
Ó Fearghaíl, Seán.
Ó Snodaigh, Aengus.
O'Brien, Jonathan.
O'Dea, Willie.
O'Sullivan, Maureen.
Shortall, Róisín.
Smith, Brendan.
Stanley, Brian.
Tóibín, Peadar.

Tellers: Tá, Deputies Emmet Stagg and Paul Kehoe; Níl, Deputies Aengus Ó Snodaigh and Seán Ó Fearghaíl.

Question declared carried.

Amendment declared lost.

Deputy Alan Shatter

I move amendment No. 134:

In page 77, to delete lines 16 to 22 and substitute the following:

"(f) that the personal insolvency practitioner has completed a statement under section 50 in respect of the debtor;".

Amendment agreed to.

Deputy Pádraig Mac Lochlainn

I move amendment No. 135:

In page 77, lines 33 and 34, to delete "the secured creditor concerned" and substitute "his or her creditors".

The purpose of the amendment is to broaden the scope from secured creditors to all creditors. The categorisation is too limited and could exclude unsecured creditors. We ask the Minister to consider this.

Deputy Alan Shatter

I fail to see how the amendment adds anything to the understanding of the provisions in section 88. Rather, it risks confusion by seeking to add a reference to creditors other than the secured creditors concerned with regard to the Central Bank process on mortgage arrears on the principal private residence. This is a very specific reference with regard to the debtor's prior involvement with the financial institution and I oppose the amendment.

Question, "That the words proposed to be deleted stand", put and declared carried.

Amendment declared lost.

An Ceann Comhairle

Amendments Nos. 136 and 174 are related and may be discussed together.

Deputy Alan Shatter

I move amendment No. 136:

In page 77, line 44, to delete "in force" and substitute "in effect".

These are technical drafting amendments which are required to ensure consistency in the terminology used in the Bill.

Amendment agreed to.

Deputy Alan Shatter

I move amendment No. 137:

In page 78, to delete lines 14 to 21.

Amendment agreed to.

Deputy Alan Shatter

I move amendment No. 137a:

In page 78, line 26, to delete "and the factors referred to in subsection (2)".

Amendment agreed to.

Deputy Pádraig Mac Lochlainn

I move amendment No. 138:

In page 78, line 44, to delete "€3,000,000" and substitute "€1,000,000".

Question, "That the figure proposed to be deleted stand", put and declared carried.

Amendment declared lost.

Deputy Alan Shatter

I move amendment No. 139:

In page 79, to delete lines 11 to 13 and substitute the following:

"(e) a schedule of the creditors of the debtor and the debts concerned, stating in relation to each such creditor—

(i) the amount of each debt due to that creditor, and".

Amendment agreed to.

Deputy Alan Shatter

I move amendment No. 140:

In page 79, to delete lines 17 to 22 and substitute the following:

"(f) the debtor’s written consent to—

(i) the disclosure to the Insolvency Service,

(ii) the processing by the Insolvency Service, and

(iii) the disclosure by the Insolvency Service to creditors of the debtor concerned,

of personal data of that debtor, to the extent necessary in respect of the Personal Insolvency Arrangement procedure provided for in this Chapter; and".

Amendment agreed to.

Deputy Alan Shatter

I move amendment No. 141:

In page 79, to delete lines 23 to 25 and substitute the following:

"(g) the debtor’s written consent to the making of any enquiry under section 90 relating to the debtor by the Insolvency Service.".

Amendment agreed to.

Deputy Alan Shatter

I move amendment No. 142:

In page 83, line 18, after "process" to insert "in respect of a specified debt".

Amendment agreed to.

Deputy Alan Shatter

I move amendment No. 143:

In page 83, line 23, after “Arrangement” to insert the following:

", but this subsection shall not operate to prohibit the commencement or continuation of any criminal proceedings against the debtor".

Amendment agreed to.

"(c) in the first three years post enactment of this Act, the maximum duration of a Personal Insolvency Arrangement shall be limited to a maximum of 48 months, after which, and on return to normality, the period should be increased again to 72 months;".

Amendment put and declared lost.

An Ceann Comhairle

Amendments Nos. 149 to 153, inclusive, are related and may be discussed together.

Deputy Pádraig Mac Lochlainn

I move amendment No. 149:

In page 86, to delete lines 9 and 10.

We do not believe there should be an exemption for any liabilities or debts as outlined in the Bill. Everybody should be treated the same when it comes to creditors, whether it is the local authority, the Government or the bank. Everybody should have to engage with the same process.

Deputy Alan Shatter

The Deputy proposes the deletion of the current reference to certain categories of debt in section 95. These debts, which broadly refer to charges of a local authority nature, debts owed under the Nursing Homes Support Scheme Act 2009 or arrears owed to a management company under the Multi-Unit Developments Act 2011 may only be proposed for debt resolution in a personal insolvency arrangement, and in a debt settlement arrangement although the Deputy makes no proposal on this, with the express consent of those creditors. This approach in regard to these debts is appropriate. I will give the Deputy the example of a multi-unit development in which a range of people who live in various apartments each owe a sum which is important for the services in the development. The principle is that this should be discharged because if it is not the debt will effectively fall on the shoulders of all of those who have been making their payments and utilising the services. It would be possible for the apartment management, with the agreement of others living in the apartments, to expressly consent to opt into the arrangement but if they do not the debt must be discharged.

If it were not, a range of people in an apartment block, perhaps including elderly retirees, would ultimately have the cost of the debt fall their shoulders in so far as there was a shortfall of income in the block. I do not know the extent to which the Deputy has thought through that issue but I cannot accept the amendments proposed.

Deputy Stephen S. Donnelly

I seek clarification. While I am inclined to agree with Deputy Mac Lochlainn on this, I will stick to the Minister's example. The majority creditor with a veto is usually the bank. Is it correct that those who are mostly minority debtors would not be able to veto any arrangement, in which case the PIA, irrespective of whether it agreed, would effect a discharge? In this regard, one should consider the contrasting circumstances. It seems very arbitrary that a management company would still be owed money while a credit union, local business person or landlord would not.

I am not accusing the Minister of hypocrisy but believe that it is slightly hypocritical for all of us to say we, by way of this Government Bill, will discharge debts to the bank, landlord and credit union but not to the Government. Perhaps I misunderstand the Minister's position. Could he clarify it?

Deputy Alan Shatter

There are certain debts that people will have to discharge because of their nature. If there is a sum due to a local authority, it will have to be discharged because the shortfall would effectively have an impact on everybody living in the local authority area. It is not a question of paying a management company as such. Where there is an apartment block, the owners or someone exercises management control. I do not refer to money for the management company but to money to meet the running of the apartment block. We are saying that someone in the process who may continue to live in the apartment block and even have a mortgage arrangement to be resolved under the personal insolvency arrangement, and who is continuing to avail of all of the services of the apartment, including having someone cut the grass and carry out maintenance, will have to pay what is owed. The sums in question for those living in an apartment are not usually enormous in any case.

The proposal would have an impact on too many disparate individuals. We do not want to create circumstances in which owners of apartment blocks find themselves paying money to management companies to keep engaging in this sort of process, which may make it unviable for them to participate because of the difference between the cost of participation and the sum actually due. There are certain debts, identified as a matter of policy, that will have to be paid where one goes into a PIA or DSA. Those engaged in the process for the arrangement will know their debts will have to be paid in the context of that process. They are readily identifiable.

Deputy Stephen S. Donnelly

During the process?

I move amendment No. 154:

In page 87, to delete lines 41 and 42 and substitute the following:

"(3) The Insolvency Service shall publish a code of practice providing guidance on the matters set out in subsection (2), as well as a rule that Personal Insolvency Practitioners will be paid from monies available for distribution to creditors once repayment proposals are accepted.".

Question, "That the words proposed to be deleted stand", put and declared carried.

Amendment declared lost.

Deputy Pádraig Mac Lochlainn

I move amendment No. 155:

In page 90, between lines 41 and 42, to insert the following:

"(7) The lender will also be obliged to propose a solution to the borrower’s problem.".

This is similar to an earlier amendment. The objective is to ensure the practitioner does his job effectively.

Deputy Alan Shatter

Section 98 sets out a number of detailed requirements, primarily in regard to the valuation and treatment of a security held by a secured creditor in a personal insolvency arrangement. It is not clear in regard to the provisions of this section what the Deputy's proposal seeks to achieve. For example, what would his reaction be if, in the context of his proposal, the secured creditor proposed full and immediate payment of the loan or repossession of any property concerned? The provision of the new personal insolvency arrangement is a significant solution to addressing the problems of debt, in particular where a whole mortgage might be concerned. I do not envisage this amendment achieving an objective that merits its being taken on board in the circumstances. It is unacceptable and I oppose it.

Amendment put and declared lost.

Deputy Alan Shatter

I move amendment No. 156:

In page 91, to delete lines 29 and 30 and substitute the following:

(b) a reduction of the principal sum due in respect of the secured debt due to that secured creditor to a specified amount,".

This is effectively a drafting amendment. Its purpose is to ensure consistency between the wording of subsections (2) and (3) of section 99.

Amendment agreed to.

Deputy Alan Shatter

I move amendment No. 157:

In page 93, to delete lines 5 to 8 and substitute the following:

"require the debtor to—

(a) dispose of an interest in, or

(b) cease to occupy,

all or a part of his or her principal private residence and the personal insolvency practitioner shall consider any appropriate alternatives.".

Amendment agreed to.

Deputy Alan Shatter

I move amendment No. 158:

In page 94, line 2, to delete "that".

Amendment agreed to.

An Ceann Comhairle

Amendments Nos. 159 and 182 are related and may be discussed together.

Deputy Stephen S. Donnelly

I move amendment No. 159:

In page 94, between lines 3 and 4, to insert the following:

"(5) Before making an order providing for the possession and/or repossession of a principal private residence, the court shall consider the nature and value of assets available to the debtor, the extent of his liabilities, and whether the debtor’s inability to meet his engagements could, having regard to those matters in the contents of the debtor’s statement of affairs filed with the court, the number and ages of the debtor’s dependants occupying the principle private residence, and any other matter the court considers appropriate to take into account, be more appropriately dealt with by means of a personal insolvency arrangement and where the court forms an opinion the court may adjourn the hearing of any application for repossession to allow the debtor an opportunity to enter into such of those arrangements as is specified by the court in adjourning the hearing.".

The intent is to stop the banks gaming the legislation by refusing to engage substantively in a PIA and then moving for repossession of a house. The Bill gives discretion to the judge in the case of a debtor applying for bankruptcy. The two amendments simply seek to allow to judge the same discretion when the bank moves to repossess. I am concerned and am hearing whispers that, in certain cases, the banks will refuse to engage with the debtors, apply their veto and seek to repossess their houses. An obvious case in which it is financially rational for the banks to do so is if there is positive equity in the house. This should be compared with an agreement whereby, instead of writing down the total mortgage to a serviceable amount, the banks would just say they are not interested in doing so and take the house. While a judge may be able to adjourn temporarily as the legislation stands, he cannot really apply discretion and tell the bank it is clearly gaming the system, that a very reasonable offer, backed up by the PIP, has been made, that it is not getting the house and that it should re-enter the arrangement.

Mine is a simple concept but it is genuinely very important, not because of what happens in the courts, I hope, but because of the negotiations around the table, such that a bank's representatives could not nod appropriately at negotiations and then exercise a veto to repossess a house. It is in this spirit that I ask the Minister to consider accepting my amendment.

Deputy Alan Shatter

I thank the Deputy for tabling this amendment because it highlights an important element of discussion in regard to this issue, on which it is worth spending a few minutes.

The Deputy's amendment No. 159 essentially concerns repossession applications before the courts. It does not relate to personal insolvency arrangement applications as provided for under this Bill, although I understand the Deputy's point regarding how the law in this area could impact on the negotiation stance taken by a financial institution. Section 100 concerns matters in regard to a debtor's principal residence to which regard must be had, primarily by a personal insolvency practitioner, in preparing a proposal for an arrangement on behalf of the debtor. There is no involvement of the court under this section. Applications for repossession of property are not dealt with in the Bill. These are properly the matter of the court concerned and cannot be treated in the same context.

I accept that the Deputy's motivation in this amendment is to offer further elements of protection to home owners in arrears who may be facing repossession proceedings. His proposal is well intentioned and laudable, but it is not relevant either to this section or to the Bill in general. I understand his point regarding the negotiation mode a financial institution might assume. I assure him that in the context of any necessary revision of the Land and Conveyancing Law Reform Act 2009 following the Dunne and other judgments, I will consider the inclusion of a provision to address the Deputy's concerns. This might be along the lines of section 138 of this Bill, which provides that in the context of a bankruptcy petition, the court is required to consider whether the matter might better be dealt with by way of one of the non-judicial processes set out in the Bill.

Amendment No. 182 seeks to amend section 116 in respect of the grounds upon which a creditor may appeal to the court to set aside a personal insolvency arrangement which was agreed by majority vote. These provisions are standard, referring to both procedural deficiencies and any fraudulent type behaviour on the part of the debtor. It would not be appropriate to attribute unreasonableness to a creditor seeking to exercise lawful rights.

I must reject these amendments for the reasons I have outlined, but I thank the Deputy for raising the issue. There is a need for legislation to address the Dunne judgment and work is already under way in my Department in this regard. We have given greater priority to the legislation before us today in order to facilitate arrangements of a reasonable nature being entered into, where appropriate, through the use of a personal insolvency arrangement in circumstances where there are mortgage difficulties. The Deputy's proposal is a very worthwhile one, and it will certainly inform the preparation of the other Bill I mentioned.

Deputy Stephen S. Donnelly

I greatly appreciate the Minister's openness to taking account this matter in future legislation. In the interim, however, what can be done to prevent the banks from making possession orders? In a situation where there is positive equity in a property, I cannot envisage a bank agreeing to write down a portion of debt rather than opting immediately for repossession. Is it the Minister's expectation that this is essentially what will happen in advance of the introduction of the legislation to which he referred? If not, will he indicate the basis for his expectation that the banks might cut deals when they can simply take possession?

Deputy Alan Shatter

Financial institutions will cut deals because the reality of the current situation is that distressed borrowers are far more likely than not to be in negative equity. That is the reality we are facing. An individual who has a family home that is in positive equity might also have other borrowings against other properties. I expect the personal insolvency arrangement mechanisms set out in this Bill will be used to cut deals in those circumstances, where the overall borrowings are not adequately secured on the totality of the property assets.

If, on the other hand, we are talking about a single property with an equity in excess of what is owed, I do not see any reason that a bank would not seek to ensure it receives the full sum ultimately due to it, whether through repossession or other arrangements. It is not for us to interfere with that arrangement because there are constitutional issues and issues relating to the liquidity of banks and capitalisation. The mechanisms set out in the Bill do not seek to facilitate individuals who have real equity in property and are simply refusing to pay what is due. If it is the case that their income does not allow them to pay, the bank might well decide to enter into some form of arrangement with them. We should bear in mind that the banks have obligations in terms of protecting their capital base and not creating additional liabilities for taxpayers in this country. In that context, I do not envisage any bank concluding that because it has adequate security and the property is in positive equity, it will waive the money owed to it by the debtor. There is no reality in that.

I anticipate that the mechanism we are discussing here will be particularly helpful in circumstances where individuals are in negative equity and their income does not facilitate them in discharging debts, in which circumstances the bank decides it will go for repossession. That situation will be dealt with under the land and conveyancing legislation, with the court being obliged to inquire as to whether the parties have engaged in a non-judicial debt resolution process. I expect the modalities would involve a presentation to the court of the totality of the debtor's income, resources and liabilities and an assessment of whether he or she is in financial circumstances to make a reasonable payment of debt. It will be blindingly obvious in such circumstances that a repossession order would not lead to the bank recovering the debt owed to it in full. Instead of dealing with the application to repossess, the court would be able to propose to the financial institution that the matter be adjourned for a period in order to allow an exploration of a non-judicial debt resolution. The court would not have the power to impose such a resolution, but this approach would create the space to allow for that option.

It is not our intention in this legislation to give individuals who are in positive equity and not paying their mortgage a free pass whereby some of the debt due to a financial institution is written off in a manner that affects its capital position and could ultimately result in the tab being picked up by taxpayers. There is a range of issues attached to that, such as the actual value of the bank, what space we get to at a point in time and whether the State's ownership of banks can be traded in for funding to recoup some of what has been put into them.

I move amendment No. 162:

In page 97, lines 35 and 36, to delete "section 104" and substitute "section 102".

This drafting amendment corrects a cross-referencing error in the text of section 105.

Amendment agreed to.

Acting Chairman (Deputy Joanna Tuffy)

Amendment No. 163 arises from committee proceedings and if it is agreed, amendment No. 164 cannot be moved. Amendments Nos. 163 to 168, inclusive, are related and amendment No. 164 is an alternative to amendment No. 163. Amendment No. 166 is an alternative to amendment No. 165, while amendment No. 168 is an alternative to amendment No. 167. All these amendments may be discussed together by agreement.

Deputy Pádraig Mac Lochlainn

I move amendment No. 163:

In page 98, lines 24 and 25, to delete “65 per cent” and substitute “30 per cent”.

There may be a difference in emphasis in the amendments from myself and Deputy Niall Collins but the intent is the same - that is, to prevent banks having a veto over this process. The objective of the Bill is to work through that section of our people who are in mortgage distress or other debt as a result of this crisis. In addition, the legislation tries to find a compassionate balance between their responsibilities, as well as understanding the unique circumstances and environment that led to where they find themselves today. We do not want to give banks the ability to stonewall. We want this legislation to benefit as many families in distress as possible. That is what this series of amendments try to do.

I would particularly urge the Minister to consider the amendment before us. We want to send a message out to creditors that they do not have a veto, or the capacity not to engage constructively in this process. We want to give people hope, so we do not wish to have an imbalance at the start of the process as people in distress engage with this and try to work their way through it. The difficulty in terms of the numbers the Minister has put in place is that they do give a veto, which is not right.

Deputy Niall Collins

I wish to speak to the group of amendments because I may not get a chance to move mine if the others fall. I am sure the Minister will appreciate that this is the elephant in the room concerning this legislation. It is the item which has been most commented upon by outside observers who are following this debate. If one looks at the figure of 65% in terms of total debt, a majority is 51% so if a majority of creditors agree to an arrangement that should be 50% or 51% rather than 65%. When one works that down the line in terms of the secure debt, which is the bank as the mortgage provider, allowing them a disproportionate figure such as 50% does not seem to make sense.

The Minister says the process will be monitored and that we will have to suck it and see once the legislation is enacted, and keep everything under review. However, this part is the main bone of contention in the Bill, so how will this aspect be monitored, given that the bank is the main creditor? At a meeting of 20 creditors, 19 of them may be spectators because the bank representative has the entire say, so how will we monitor that? Will there be sufficient feedback to prove that the Minister is right and we are wrong, or vice versa?

Deputy Alan Shatter

I will deal with amendments Nos. 163 to 168, inclusive, together. The amendments seek to reduce the voting proportions in respect of all creditors. A sub-class of secured and unsecured credit is required to prove a personal insolvency arrangement at a creditors' meeting.

Amendments Nos. 163 and 164 concern proposals to reduce the overall level of votes required at a creditors' meeting to prove a personal insolvency arrangement from the 65% provided for in the Bill to either 30% or 50%. This is a crucial provision with regard to the necessary voting proportions required to approve an arrangement. I consider it unlikely that, in effect, creditors would accept a non-majority vote and agree to be bound by it.

Amendments Nos. 165 and 166 propose to alter the proportions of secured credit that is required to prove a personal insolvency arrangement below 50%.

Amendments Nos. 167 and 168 similarly propose the same proportions of unsecured credit as required to prove a personal insolvency arrangement. I am not convinced that the reductions, as proposed in these various amendments, represent the best approach. They could in fact inhibit reaching an agreement that would be sustainable over a six-year period for a personal insolvency arrangement.

I have considered the various proportions but at this point I have no better alternative proposals. I do not wish to be unfair to Deputies but I have not heard any convincing arguments from them as to why accepting their proposals would enhance the likely acceptance and success of personal insolvency arrangements. I must therefore oppose the amendments.

Acting Chairman (Deputy Joanna Tuffy)

The other amendments are being discussed as well, so does Deputy Collins wish to contribute on them?

Deputy Niall Collins

No. They are all the same.

Acting Chairman (Deputy Joanna Tuffy)

Is amendment No. 163 being pressed?

Deputy Pádraig Mac Lochlainn

Yes.

Question put: "That the words proposed to be deleted stand."

The Dáil divided: Tá, 80; Níl, 40.

Tá

Bannon, James.
Barry, Tom.
Breen, Pat.
Butler, Ray.
Buttimer, Jerry.
Byrne, Catherine.
Byrne, Eric.
Carey, Joe.
Collins, Áine.
Conaghan, Michael.
Conlan, Seán.
Connaughton, Paul J.
Conway, Ciara.
Coonan, Noel.
Coveney, Simon.
Creed, Michael.
Daly, Jim.
Deasy, John.
Deering, Pat.
Doherty, Regina.
Dowds, Robert.
Doyle, Andrew.
Durkan, Bernard J.
Farrell, Alan.
Feighan, Frank.
Fitzgerald, Frances.
Fitzpatrick, Peter.
Flanagan, Terence.
Griffin, Brendan.
Hannigan, Dominic.
Harrington, Noel.
Harris, Simon.
Hayes, Tom.
Heydon, Martin.
Hogan, Phil.
Humphreys, Heather.
Humphreys, Kevin.
Keating, Derek.
Keaveney, Colm.
Kehoe, Paul.
Kelly, Alan.
Kenny, Seán.
Lawlor, Anthony.
Lynch, Ciarán.
Lynch, Kathleen.
McCarthy, Michael.
McEntee, Shane.
McHugh, Joe.
McLoughlin, Tony.
Maloney, Eamonn.
Mathews, Peter.
Mitchell O'Connor, Mary.
Mulherin, Michelle.
Murphy, Dara.
Murphy, Eoghan.
Nash, Gerald.
Neville, Dan.
Nolan, Derek.
Noonan, Michael.
Ó Ríordáin, Aodhán.
O'Donnell, Kieran.
O'Donovan, Patrick.
O'Reilly, Joe.
O'Sullivan, Jan.
Perry, John.
Phelan, Ann.
Phelan, John Paul.
Reilly, James.
Ring, Michael.
Ryan, Brendan.
Shatter, Alan.
Spring, Arthur.
Stagg, Emmet.
Stanton, David.
Timmins, Billy.
Tuffy, Joanna.
Twomey, Liam.
Wall, Jack.
Walsh, Brian.
White, Alex.

Níl

Boyd Barrett, Richard.
Broughan, Thomas P.
Browne, John.
Calleary, Dara.
Collins, Joan.
Collins, Niall.
Colreavy, Michael.
Cowen, Barry.
Crowe, Seán.
Daly, Clare.
Doherty, Pearse.
Donnelly, Stephen S.
Ferris, Martin.
Fleming, Sean.
Fleming, Tom.
Halligan, John.
Healy, Seamus.
Healy-Rae, Michael.
Kirk, Seamus.
Kitt, Michael P.
Mac Lochlainn, Pádraig.
McDonald, Mary Lou.
McGrath, Finian.
McGrath, Mattie.
McGrath, Michael.
McGuinness, John.
McLellan, Sandra.
Moynihan, Michael.
Murphy, Catherine.
Ó Caoláin, Caoimhghín.
Ó Fearghaíl, Seán.
Ó Snodaigh, Aengus.
O'Brien, Jonathan.
O'Dea, Willie.
Pringle, Thomas.
Ross, Shane.
Shortall, Róisín.
Smith, Brendan.
Stanley, Brian.
Tóibín, Peadar.

I move amendment No. 172:

In page 100, line 43, to delete "by the Insolvency Service" and substitute "under section 91".

Amendment agreed to.

Deputy Alan Shatter

I move amendment No. 173:

In page 101, lines 39 and 40, to delete all words from and including "every" in line 39 down to and including "meeting" in line 40 and substitute the following:

"in respect of every specified debt, the creditor concerned,".

Amendment agreed to.

Deputy Alan Shatter

I move amendment No. 174:

In page 102, line 38, to delete "in force" and substitute "in effect".

Amendment agreed to.

Acting Chairman (Deputy Joanna Tuffy)

If Amendment No. 175 is agreed, amendment No. 176 cannot be moved. Amendments Nos. 175 to 180, inclusive, are related and may be discussed together by agreement. Amendment No. 178 is an alternative to amendment No. 177 and amendment No. 180 is an alternative to amendment No. 179.

Deputy Pádraig Mac Lochlainn

I move amendment No. 175:

In page 105, lines 17 and 18, to delete "65 per cent" and substitute "30 per cent".

I will not labour the point and the argument is the same as we heard earlier.

I move amendment No. 184:

In page 107, line 23, to delete "a Personal Insolvency Arrangement" and substitute "that Personal Insolvency Arrangement".

Amendment agreed to.

Deputy Alan Shatter

I move amendment No. 185:

In page 107, between lines 43 and 44, to insert the following:

“(2) For the purposes of subsection (1)(e), a debtor is in arrears with his or her payments for a period of not less than 3 months where—

(a) at the beginning of the 3 month period ending immediately before the day on which the application was made, one or more than one payment in respect of the debts became due and payable by the debtor under the Personal Insolvency Arrangement, and

(b) throughout that 3 month period, the debtor was in arrears in respect of any or all of those payments.

(3) On hearing an application under subsection (1) the appropriate court may—

(a) dismiss the application,

(b) terminate the Personal Insolvency Arrangement, or

(c) order that the personal insolvency practitioner prepare a proposal for a variation of the arrangement in accordance with section 115.".

This amendment would insert new sections 117(2) and 117(3). The new subsection (2) provides a definition of a three-month arrears period for the purposes of section 117(1)(e).

The new subsection (3) provides for the powers of the appropriate court in respect of an application by the personal insolvency practitioner to have the personal insolvency arrangement terminated under section 117(1). Similar provisions have already been made in sections 79(2) and 79(3) in respect of the termination of debt settlement arrangements.

Amendment agreed to.

Deputy Niall Collins

I move amendment No. 186:

In page 107, line 45, to delete "6 months" and substitute "9 months".

This is similar to some preceding amendments and pertains to the personal insolvency arrangement, PIA. Where a debtor falls into arrears, the amendment will stretch the period from six months to nine months. This is a flexibility measure.

Deputy Alan Shatter

I am opposed to this amendment, which is similar to amendments Nos. 124 to 127, inclusive, regarding the period in which a debt settlement arrangement is deemed to have failed. There is no point in revisiting the arguments on the personal insolvency arrangement.

Question, "That the words proposed to be deleted stand", put and agreed to.

Amendment declared lost.

Deputy Alan Shatter

I move amendment No. 187:

In page 108, line 14, to delete "otherwise;" and substitute "otherwise; or".

Amendment agreed to.

The amendment allows me to agree broadly with the thrust of the proposal from the Deputy. I am of the view that the amount of €650 in regard to a debtor seeking to obtain credit without informing the other person of his or her participation in a debt resolution process under this Bill should be standardised. That amount is already provided for in section 33 in respect of the debt relief notice and in section 76 in respect of the debt settlement arrangement and does not need amendment. I will table an amendment in the Seanad to reduce the amount from the current €1,000 in a PIA to €650. I hope that Deputy Mac Lochlainn can accept this clarification and withdraw his amendment.

Amendment, by leave, withdrawn.

Deputy Pádraig Mac Lochlainn

I move amendment No. 191:

In page 113, line 23, after "creditor," to insert the following:

"and where the consent of both the creditor and debtor has been secured,".

Deputy Alan Shatter

I am advised that the proposal from the Deputy is not necessary. It would not add to the comprehension of section 130, which deals with the setting off of assets and debts between a debtor and a creditor. The balance would then likely be the subject of a debt resolution process as provided for under this Bill. The issue of consent as such does not arise in this particular context. For that reason, I am opposed to the amendment.

Amendment, by leave, withdrawn.

Deputy Stephen S. Donnelly

I move amendment No. 192:

In page 118, line 18, after "discharged." to insert the following:

"In the first three years post enactment of the Personal Insolvency Act 2012, all bankruptcies shall be discharged after two years. Thereafter, and on return to normality, the period of bankruptcy shall be increased again to three years.".

A few issues arise, but I will not go over one of them again, namely, clearing the debt as quickly as possible. As the Minister will see, I am in favour of temporary periods of shortening. There is an incentive to move to the UK for one year. Ireland having a term that is three times as long as is available in the next jurisdiction makes going to the UK, which we would prefer not to happen, considerably more attractive for many people. As such, three years may be too much.

Instead of discussing economic growth and so on again, I will use this opportunity to raise one or two bankruptcy issues. First, the question of bankruptcy payment orders, BPOs, has been raised urgently by the Free Legal Advice Centres, FLAC, the Money Advice & Budgeting Service, MABS, and others. As the legislation stands, the bank will be able to apply for a five-year BPO at the end of the three-year period, making it a de facto eight-year period. This is far too long and is not a credible option. It will allow the banks to trap people again and I urge the Minister strongly to examine the issue. I have no problem with attaching a BPO to a bankruptcy if there is income that can be used, but it should ideally be constrained to the period of the bankruptcy. This is an urgent issue.

Second, a technical issue was brought to my attention last week. Many employment contracts, particularly with multinationals, contain a clause to the effect that, if an employee enters an agreement with his or her creditors, that employee is instantly fired. One such contract will be terminated if an employee is declared bankrupt or makes any arrangement or composition with his or her creditors generally. That provision would preclude many people from using this legislation. I urge the Minister to examine this issue.

I do not believe that we have covered a third issue, namely, the conditions of the bankruptcy. One or two elements are old worldly and unhelpful, particularly that of not having a bank account. This matter should be considered in terms of the mechanics of paying.

I would prefer three years to two, but we will not go over the issue again, as I do not imagine that the Minister will accept my amendment. There is an interesting comparative issue with the UK's one-year period. It is incredibly important that the BPOs be constrained, as they restore all of the banks' power to squeeze borrowers.

Deputy Alan Shatter

I welcome that the Deputy has raised these three issues. We are considering them in the context of Seanad amendments to the Bill. I share his concerns. We have had an opportunity to work through this and consider it with regard to the BPOs. We are revisiting that in the context of our own considerations and what the Deputy has to say on the issue.

The bank account issue is important. We are considering whether we can incorporate an amendment into the Bill to deal with that issue. If people enter into a debt settlement arrangement or PIA, there is nothing in law to stop him or her having a bank account, but we do not want a situation in which financial institutions decide not to give him or her a bank account. Where individuals who are working through debts have some form of income, a bank account may be essential for that income to come in, for debt payments to be made and for there to be a very efficient and easy mechanism to see what is coming in and going out. The bank account can be the easiest way of doing it. Clearly, if someone in a PIA or debt settlement arrangement is to have a bank account, it must be one in which there is not an overdraft facility.

I am concerned about another issue. One may not have a credit card, but there is no reason one should not have a debit card if it is usable on a bank account with no overdraft facility. The debit card is just a payment facility instead of carrying cash. I want to examine both issues. We have been giving some thought to them and will see whether we can address them.

In terms of bankruptcy, the Deputy is right. Perhaps an individual who is bankrupt can maintain a single bank account, but only in the context of there being no overdraft facility so that another level of indebtedness is not being created in the middle of a bankruptcy, which clearly would not be viable.

The same issue would apply to debt cards as opposed to credit cards. It is my intention to revisit those.

The determination clauses in contracts are interesting. Clearly, one does not want individuals who are very competent in their jobs but who, for a number of reasons, have got themselves into financial trouble to find themselves unemployed. It is not in their interest nor in the interest of creditors. There is an issue of private contracts concluded between individuals and whether one can, in legislation, interfere with an existing contract. That is a particular issue which has a constitutional dimension. One can certainly provide for legislation which ensures that a clause, such as the one the Deputy mentioned, would be void in future contracts. This is an issue on which we have to consult the Attorney General's office. It is not quite as simple as it looks and we need to be careful about how we deal with it.

There are other areas and there are particular professions in which by virtue of becoming bankrupt one is not entitled to practice one's profession, and in circumstances where the bankruptcy has nothing to do with any dishonesty in the manner in which one ran one's profession. For example, someone might have foolishly borrowed money from banks to invest in property or to invest in some business having taken the view that if he or she bought some share in a business, he or she would do well out of it but has lost money on that and is in difficulty, even though he or she is competent in his or her profession and if the bankruptcy does not give rise to any judgments about his or her competency in his or her profession. There is an issue, for example, where professions are self-regulated or if there is a statutory provision. Should a bankruptcy prevent someone continuing to work in that profession? There are other issues.

One of the matters about this legislation is the huge areas it must cover and its complexity. I suspect the day it is enacted, we will all think of something we should have addressed which is why I am saying this is not cast in tablets of stone. If we discover something in the short to medium term, which should have been addressed and which we need to address, a short amendment Bill will be produced, if needs be. However, we are looking at those areas with a view to addressing them in the Seanad which means they will come back to the Dáil in the context of any Seanad amendments made which we have not discussed in the Dáil by way of formal amendment on Report Stage.

I am afraid I will not surprise the Deputy by saying I cannot agree to the two year instead of the three year issue. There is an issue about having a neighbouring jurisdiction which allows people to exit from bankruptcy within a year. As some people have discovered, it is not quite as easy as they think to get into that jurisdiction. One has to have some real connection with it. One cannot simply take a flight over and three weeks later seek bankruptcy. In Northern Ireland and in England, individuals, with their main residence and businesses based in Ireland, have attempted to use that bankruptcy jurisdiction but they have been unsuccessful. Someone can move lock, stock and barrel and relocate and that may affect that aspect but we have to have bankruptcy legislation which we believe is reasonable.

There is a very dramatic change from where we have come in regard to the three year provision. I am afraid I cannot accept the Deputy's amendment for the period of automatic discharge from bankruptcy to be reduced from the three years prescribed here to two years. What we are doing is a significant advance on the current 12-year period. The UK is unique in its one year period. In other European countries, as the Deputy may know, the periods of time are longer. They are based on giving an opportunity for arrangements to be made in regard to a bankruptcy which may result in some value going to creditors.

Our objective here is to provide a reasonable period of time for an individual to be within bankruptcy but for bankruptcy to no longer be perceived as a penal remedy which disables individuals for the rest of their lives, or certainly for 12 years. It was the rest of a person's life when I came into office. We made a temporary change to the law bringing it down to 12 years. I am afraid I cannot accept the Deputy's amendment to reduce the three year period to a two year one.

Deputy Stephen S. Donnelly

I broadly welcome the various things the Minister said and appreciate that these issues will be taken up. I have one final thought on the bank account issue. The US is probably the most entrepreneurial country on earth and when one talks to people there about bankruptcy or failing in business, they view it as part of the normal business process on one's way to succeeding. When the Minister looks at the conditions of bankruptcy, will he keep on eye to the people in bankruptcy being able to start up new companies which is what happens in many cases in the US? It allows momentum for entrepreneurship as well as a bank account.

I take the Minister's points on the two years versus the three years. I did not think he would accept the amendment but I would like to re-emphasise that if the bankruptcy payment order is also kept to the three years, I fully accept what he said.

Deputy Alan Shatter

It elongates it otherwise.

Deputy Stephen S. Donnelly

I thank the Minister.

Deputy Alan Shatter

I agree with the Deputy that we need to change the ethos and culture. I would not regard bankruptcy as a mark of business stature but many individuals, who have developed very successful businesses in the United State providing considerable employment, were particularly unsuccessful in their early ventures into business. This is one of the reasons we are reducing the timeframe and not just to give people some hope and light at the end of the tunnel. Where people have adventurous business ideas which do not work out even though they have tried to develop them in good faith, they should not be basically disabled for many years into the foreseeable future from exercising their entrepreneurial spirit in a different venture which one would hope would be a good deal more successful than the one which may have led to bankruptcy.

Amendment put and declared lost.

Acting Chairman (Deputy Joanna Tuffy)

Amendment No. 193 is out of order as it involves a potential charge on the revenue.

Amendment No. 193 not moved.

Acting Chairman (Deputy Joanna Tuffy)

Amendment No. 194, in the name of Deputy Niall Collins, was discussed with amendment No. 87. How stands the amendment?

Deputy Niall Collins

I move amendment No. 194:

In page 121, between lines 7 and 8, to insert the following:

"(2) (a) The Minister shall within 1 month of the entering into force of this Act prescribe regulations regulating personal insolvency practitioners and imposing mandatory requirements to obtain a licence as a personal insolvency practitioner.

(b) The regulations shall specify -

(i) charges that can be levied by personal insolvency practitioners (including a prohibition on fees calculated as a percentage of the value of the debt recovered),

(ii) the length of time that these charges can be levied,

(iii) the qualifications required in order to obtain a licence as a personal insolvency practitioner,

(iv) the standards required of personal insolvency practitioners,

(v) penalties for failure to comply, and

(vi) a complaints process for debtors who are unsatisfied.

(c) The Minister shall within 6 months of the entering into force of this Act prescribe a code of conduct for personal insolvency practitioners.".

Will the Minister unveil the-----

Acting Chairman (Deputy Joanna Tuffy)

The Deputy cannot discuss the amendment.

Amendment, by leave, withdrawn.

Bill reported with amendment and received for final consideration.

Question proposed: "That the Bill do now pass."

Acting Chairman (Deputy Joanna Tuffy)

Deputy Collins could possibly ask his question now.

Deputy Niall Collins

Will the Minister flag any proposed amendments in the Seanad and any other items which have not come up for discussion here in order to give us a heads-up? In regard to the governance of the insolvency service of Ireland, the Minister has appointed a director designate. Will the Oireachtas Joint Committee on Justice, Equality and Defence have a role in regard to the membership of the board or the executive and the oversight and the corporate governance of that organisation?

Will it be done through the public advertising of positions and interviewing? Has the Minister information on that? Also, will the Minister give us an overview of how he envisages the regulation of the personal insolvency practitioners, PIPs?

Deputy Stephen S. Donnelly

I wish the Minister luck with this. A final matter, which was not relevant to any of the amendments but which would be incredibly useful, is that there should be clear communication of the Minister's intent for how this should work. That would be important not just for the PIPs but also for the public. There is so much fear, worry and lack of information among the public. When this is completed there should be a small number of case studies. It could be very simple because I believe 80% of the cases would probably fit into a quite standardised set. That would provide huge comfort and certainty to many people. Perhaps the Minister would consider issuing case studies as it would let everybody know what is expected from this legislation.

Minister for Justice and Equality (Deputy Alan Shatter)

To take up the point made by Deputy Donnelly, this is complex legislation which contains many new mechanisms. It is very important that we communicate to the general public how it is intended to work. The insolvency agency will have a particular function in that regard. If we achieve our objective of enacting the legislation before Christmas, an information process for the benefit of the public will start very early in the new year by way of a website and other mechanisms. After the enactment of the legislation there will be a phase of trying to assist the public to understand what the legislation is about in non-technical terms. We must be careful in doing that to ensure that nobody is misled about any aspect of it. I will rely on the insolvency service to perform that function. It has a particular function in that regard.

On Deputy Collins's query, there is no board for the insolvency service. The chief executive officer who has been appointed came through the public appointments system. There will be advertisements for the recruitment of the rest of the staff on Friday this week. In addition, there is an internal recruitment process where we can identify within my Department, for example, individuals who have the skill sets that would be of assistance to work in the agency. That will happen in addition to the outside recruitment that might be necessary. We have identified professionals who will need to be recruited from outside the public service and that advertisement will take place. It will be dealt with through the Public Appointments Service.

Deputy Niall Collins

There will not be a board?

Deputy Alan Shatter

No, but the connectivity between the agency and the Houses of the Oireachtas will be through an annual report that will be produced and laid before both Houses. The justice committee will be engaged. There is no particular reason or need, and the legislation does not provide for it, to create a board of people who have oversight in circumstances where we appoint a chief executive who can run the agency, produce its annual report and report to the Houses of the Oireachtas. The justice committee will be able to ask questions and raise issues.

I thank the Deputies for their contributions on all Stages. It has been a lengthy process since we published the heads of the Bill. That was a worthwhile process as it facilitated the justice committee receiving submissions, which contributed to the development of the legislation. I thank all the Deputies who engaged with the Bill at the justice committee stage. I also thank all the individuals and organisations outside the House who made submissions to help us fine tune and refine the Bill. I must point out to those groups or organisations and, indeed, the financial institutions that we have had to make our own judgments on aspects of the legislation. We have taken account of submissions received but the legislation is not designed in the image of something the financial institutions want or something for which a particular group is lobbying. Indeed, the representative body of the financial institutions, the Irish Banking Federation, is somewhat unhappy with some aspects of the Bill.

I hope we have produced a balanced legislative measure that will be of genuine assistance to those who are in serious debt and are unable to discharge it, that is, those who genuinely cannot pay as opposed to those who simply will not pay. We hope we have provided the balance that will facilitate people working their way through financial troubles in a manner that is fair to both debtors and creditors. In the context of the mortgage interest issue and people in negative equity, where there are substantial mortgage repayments outstanding or arrears accumulated, we hope that this will provide a mechanism to facilitate many people, either through debt forbearance or debt forgiveness, working their way through a process which facilitates their retaining their home and seeing genuine light at the end of the tunnel.

I particularly thank Deputies who have been engaged in the marathon we have run in the last 24 hours on Report Stage. We will take on board a number of the suggestions for further improvements in the Bill, and I have mentioned some of those. We will also reflect on some of the other issues that arose. The Bill will be subject to further development, which we will have to agree with the Attorney General's office and the Parliamentary Counsel, as it goes through Committee and Report Stages in the Seanad. Deputy Collins quite fairly asked me what areas we have not addressed that will be dealt with in the Seanad. We will deal with a number of areas. There will be a new Part 5 to replace the current Part 5. It will provide extensive provisions for the regulation by the insolvency service of the new personal insolvency practitioners. I will not go into the details but there will be regulatory provisions, oversight and provisions to ensure there are indemnities to guarantee that where funds are being dealt with, those using personal insolvency practitioners are protected.

As I said in the course of this debate, many of the regulatory mechanisms already exist in other contexts. It is a question of adapting them to the insolvency legislation. A substantial amount of work has been done on that. There was an issue at one stage as to whether it would be the Central Bank or the insolvency agency that would deal with the regulatory side but in the context of providing a unified focus on the insolvency area it was decided that it would be the insolvency agency. I was optimistic that we would be in a position to bring the amendments before this House on Report Stage but we will have them for the Seanad proceedings. Members will have an opportunity to consider them when they come back from the Seanad.

There will also be a new Part providing for the revision of courts legislation, which is necessary to operate the new insolvency processes efficiently and effectively. On the various Stages we have discussed the provisions which envisage the new debt resolution arrangements being forwarded by the new insolvency agency to the court, which is essentially the Circuit Court. We are preparing an additional Part for this legislation to ensure that this is done with maximum efficiency so we will not have a backlog of arrangements waiting to be addressed, or a backlog of applications where somebody might wish to go to the court and rely on the circumstances in which one can raise an objection to an arrangement being approved. A detailed Part in that regard will be published. It will be designed to ensure that matters are dealt with efficiently, effectively and in a manner that does not incur unnecessary expenditure.

The transfer of the functions of the Official Assignee in Bankruptcy from the Courts Service to the insolvency service will take place. It makes sense that the Official Assignee in Bankruptcy is part of the insolvency service, so we will be dealing with that. We will also be improving the practical workability of the Bill's provisions both for debtors and creditors. This is very complex legislation and we will look at whether there are other areas to consider or address to ensure that no areas of uncertainty could arise.

We have been trial-testing the legislation by examining it section by section and seeing how, in practice, it would pan out in different debt scenarios, as suggested by Deputy Donnelly. Doing so is throwing up further issues we may need to address. We believe we can do so in a timely fashion during the debate in the Seanad and bring the issues back to the House. I hope I have responded fully to the query raised by Deputy Niall Collins.

I thank Members, particularly the three present in the Chamber, for the attention they have given to the Bill. The debate and discussion we had is very important. I have been on that side of the House for far too many years and they should not be dispirited by virtue of the fact we could not take on board some of the amendments tabled. Members performed an important function in tabling amendments because it gave an opportunity to tease out aspects of the Bill. It provided food for thought and in teasing out the issues, it affords us the possibility that some issue that had not been addressed comes out of left field and one realises it must be addressed. I thank the three Members present for their dedication and their contribution.

I hope the legislation will have been enacted by the time we get to Christmas. For our part, we will do everything possible to ensure it is successful in addressing the issues we are trying to address. I am of the view none of us has a monopoly on wisdom and it may turn out, in its application, to have an unintended consequence no one predicted. That may need to be addressed and, if so, we will do so with speed. I thank my officials for their substantial work on the Bill. On occasion in this House we do not acknowledge the extraordinary work of officials in Departments.

Deputy Niall Collins

They can have tomorrow off.

Deputy Pádraig Mac Lochlainn

We tried to finish it as quickly as we could.

Question put and agreed to.

Dáil Éireann díospóireacht - Wednesday, 7 Nov 2012

Personal Insolvency Bill 2012: Report Stage (Resumed) and Final Stage

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Dáil Éireann díospóireacht -
Wednesday, 7 Nov 2012