I move: "That the Bill be now read a Second Time."
I am pleased to have this opportunity to move Second Stage of the Personal Insolvency (Amendment) Bill 2020. The main purpose of the Bill is to make a number of urgent amendments to the Personal Insolvency Act 2012 which will make it easier for insolvent persons, including those in financial difficulties arising from the economic impact of the Covid-19 pandemic, to avail of the legislation effectively.
A person is insolvent under the Act if he or she is unable to pay his or her debts in full as they fall due. The 2012 Act established three statutory mechanisms for resolving unsustainable debt: the debt relief notice, which is suitable for an insolvent person with little income or assets, and debts not exceeding €35,000; the debt settlement arrangement, which is suitable for an insolvent person with unsecured debt only; and the personal insolvency arrangement, which is suitable for an insolvent person with secured debt such as a mortgage, and it can also include unsecured debt. All three mechanisms must be initiated, and agreed, by the debtor.
A proposal for a debt settlement arrangement or a personal insolvency arrangement has to be agreed by the necessary majorities of the creditors. However, the Personal Insolvency (Amendment) Act 2015 added that if an insolvent debtor proposes a personal insolvency arrangement which includes resolving their home mortgage arrears, and their creditors reject that proposal, the debtor may apply to court for a review of the proposal and of the refusal. If the court is satisfied, after considering a number of balanced statutory criteria, that the proposal complies with all the statutory requirements, provides a better return to creditors than the available alternatives and is fair and reasonable to all parties, the court has the power to impose the rejected proposal on the creditors, allowing the debtor to remain in their home. This is the "personal insolvency court review", now at section 115A of the Act. I will be returning to it in the course of my remarks.
The main changes made by the Bill fall into three groups. First, there are two amendments to remove potential obstacles to an insolvent debtor being eligible to avail of the Personal Insolvency Act. Perhaps the most important amendment made by this Bill is in section 14(c), which amends the eligibility conditions for an insolvent debtor to apply for a court review, under section 115A of the Act, if the creditors reject the debtor's proposal for a personal insolvency arrangement which includes the debtor's home mortgage arrears. Under section 115A, the debtor is only eligible to apply for a court review if his or her home mortgage arrears date from before 1 January 2015. That condition perhaps made sense in 2015, when home mortgage arrears had become a steadily declining legacy from the last recession. However, post-Covid, it means that anyone whose financial difficulties arose after that date, for example, due to the economic impact of the pandemic, risks being ineligible to access the court review, which is a key protection for homeowners at risk of losing their homes due to mortgage arrears. The amendment, therefore, removes the requirement that the home mortgage arrears must have been first incurred before 1 January 2015 or, indeed, before any set date.
The other amendment concerned with eligibility is section 2 of the Bill, which increases the upper limit in the Act on personal assets, including savings, for an insolvent debtor to be eligible to propose a debt relief notice to his or her creditors. The amendment is to take account of certain social protection payments, such as fuel allowance or carer's allowance, which are paid in annual or biannual lump sums that can push the recipient temporarily over the current eligibility limit.
Second, the Bill allows a short extension of time to key deadlines under the Personal Insolvency Act, providing more flexibility to deal with last-minute events or exceptional circumstances, and more clarity and certainty for all parties concerned. Section 14(a) extends the 14-day time limit for a debtor to apply for a personal insolvency court review. Sections 10 and 13 allow the court to extend, in certain circumstances, the protective certificate, the 70-day period during which a debtor is temporarily protected against creditor enforcement, in order to facilitate his or her personal insolvency practitioner, PIP, putting together an arrangement to resolve the debts which is likely to be agreed by their creditors, or, under section 115A, to be upheld by the court.
Third, the Bill makes a number of practical changes to procedures to help debtors and their financial advisers to manage the personal insolvency process more effectively, as follows: sections 3 and 5 of the Bill allow key advisory meetings between the debtor and his or her statutory financial adviser to take place remotely, which is important during social distancing restrictions, subject to certain conditions; sections 7 and 17 provide a framework for a PIP to delegate work to another person working in the same firm, subject to certain conditions; and sections 15 and 16 provide for a simpler, less formal and less costly alternative option to a statutory declaration for debtors to solemnly confirm the facts of their financial difficulties.
Many of the amendments contained in the Bill arise from submissions made by stakeholders to the public consultation on the statutory review of the Personal Insolvency Acts. It was decided to bring them forward in this urgent Bill because of their relevance to the economic impact of the pandemic, to the particular health risks arising from the pandemic - for example, if a debtor or his or her financial adviser becomes unexpectedly ill due to the pandemic just before a key deadline - and to the logistical and practical challenges arising from necessary public health restrictions.
There has been extensive further consultation in 2020, in particular with the Insolvency Service of Ireland, the Money Advice and Budgeting Service, MABS, the Courts Service and associations representing personal insolvency practitioners on identifying the amendments most needed in the light of the pandemic and during the preparation of this Bill. I should emphasise, however, that the Bill does not limit the amendments to the duration of the pandemic as they are considered valuable beyond that period.
The Bill is a first delivery under the programme for Government commitment to "Introduce the necessary reforms to our personal insolvency legislation and ensure that sufficient supports are in place for mortgage holders with repayment difficulties." A further personal insolvency (amendment) Bill is also included in the Government legislation programme, published in January 2021. That is a larger Bill to address comprehensively the recommendations arising from the statutory review of the Personal Insolvency Acts. The report of the review is expected to be completed this summer and work will begin on the general scheme of that Bill later this year.
I will now address the main provisions of the Bill. Section 2 increases the limit on personal assets for an insolvent person to be eligible for a debt relief notice from €400 to €1,500. In addition to this figure, reasonably necessary household goods to a total value of €6,000 and a motor vehicle valued up to €5,000 are disregarded. The increase is important because certain social protection payments, such as fuel allowance or carer's allowance, are paid in annual or semi-annual lump sums that exceed €400. The Money Advice and Budgeting Service has advised that an insolvent person who receives one of these allowances can then appear to exceed the current ceiling when his or her financial circumstances are in fact suitable to a debt relief notice. Increasing the ceiling to €1,500 will remove this problem.
Sections 3 and 5 amend sections 27 and 49 of the Act, respectively, to allow the key advisory meeting between an insolvent person and an authorised financial adviser to be held remotely via electronic communications technology, subject to certain protective conditions, as an alternative to meeting in person. Section 3 refers to a meeting with an approved intermediary about seeking a debt relief notice, while section 5 refers to a meeting with a personal insolvency practitioner about seeking a debt settlement arrangement or a personal insolvency arrangement.
Section 4 is a consequential provision that supports the introduction of the new option for a debtor to sign a "confirmation of truth" instead of having to make a statutory declaration. Section 6 corrects an erroneous cross-reference in the Act to the maximum permitted duration of a personal insolvency arrangement.
Section 7 allows a personal insolvency practitioner to delegate the performance of his or her functions under the Act, subject to certain conditions, to a person employed by the PIP, or who works with the PIP in the same firm. The delegating PIP remains responsible for the performance of the function or act by the person to whom it is delegated. The Insolvency Service of Ireland, which is the professional regulatory body for PIPs, is empowered to make regulations to govern any delegation to a person who is not a PIP. Sections 8 and 9 are consequential provisions relating to the new option of making a confirmation of truth instead of a statutory declaration.
Sections 10 and 13 are important amendments which, as I outlined earlier, clarify the grounds on which a protective certificate may be extended and introduce a new additional ground, where the court considers that it would be just to extend protection by up to 40 days by reason of exceptional circumstances or other factors which are substantially outside the control of the debtor or the PIP. Sections 11 and 12 are further consequential provisions relating to the new option of making a confirmation of truth.
Section 14 is arguably the most important of the amendments. It makes three changes to section 115A of the Act concerning the personal insolvency court review. Section 14(a) extends the deadline for the debtor's PIP to apply for the court review. The current deadline is 14 days and the amendment extends the deadline, in all such applications under section 115A, to 28 days from the date of the creditor refusal. Section 14(b) clarifies that where a debtor's PIP applies for the court review within that 28-day period, whether before or after the expiry of the debtor's protective certificate, the debtor's protective certificate is continued in force until the court has decided the court review application. This provides more certainty and clarity to both debtors and creditors.
Section 14(c) is a key amendment. It removes the requirement that in order to be eligible for a court review under section 115A of the Act, the home mortgage included in the debtor's proposed personal insolvency arrangement must have already been in arrears before 1 January 2015 or indeed any set date. There is no set date put in instead of the original date.
Sections 15 and 16 are the substantial amendments that introduce the new option for a debtor to sign a "confirmation of truth", instead of having to make a statutory declaration, when applying to the Insolvency Service of Ireland for any of the three debt resolution mechanisms.
Section 17 is a consequential amendment to section 7, which provides for a personal insolvency practitioner to delegate certain functions or acts to another person working in the same firm, while remaining personally responsible for their exercise.
It is the Minister's strong view that this priority Bill is an important and urgent measure to make debt solutions more accessible to people who are in serious financial difficulties and one which will bring benefits to debtors, to creditors and to our economy and society more broadly. The Minister hopes that with the co-operation of all sides, we can facilitate its passage through the House with a view to an early enactment. I commend the Bill to the House.