Alan Shatter yesterday :
In line with a commitment in the programme for Government the personal insolvency Bill is in the course of being developed in my Department to provide for a new framework for settlement and enforcement of debt and for personal insolvency. The commitment under the EU-IMF Programme of Financial Support for Ireland is to publish the Bill in the first quarter of 2012. It is my objective to publish the measure ahead of the EU-IMF deadline, if possible. Moreover, it is intended that the heads of the Bill, which are expected to be finalised in the near future, will be forwarded to the Committee on Justice, Defence and Equality for its consideration.
The Deputy will be aware that in developing the Bill, account is being taken of the recommendations of the Law Reform Commission in its recent Report on Personal Debt Management and Debt Enforcement.That report provided an in-depth review of the personal debt regime. The economic and financial effects of certain of the new arrangements that are in contemplation are being carefully assessed to ensure that all relevant issues are addressed and their impact is fully anticipated and understood.
The Deputy will also be aware that, following the publication of recommendations in an interim report of the Law Reform Commission, I provided in the Civil Law (Miscellaneous Provisions) Act 2011 for the reduction of the period to apply to the court for discharge from bankruptcy from 12 years to five years, subject to the same conditions that currently exist and, for the first time in Irish law, for the automatic discharge of bankruptcies on the 12th anniversary of the bankruptcy adjudication order. Those provisions were commenced with effect from 10 October 2011. A number of other mainly technical improvements to bankruptcy law contained in the Act of 2011 are already in force since 2 August 2011.
The question of a further reduction in the period for automatic discharge of a bankrupt and the period for application to the court for discharge from bankruptcy are being considered in the context of finalisation of my proposals on the personal insolvency Bill. The decision will be made having regard to the Keane report as well as the very focused discussion that continues between my Department and key stakeholders to identify the optimum new structures, at minimal cost, to bring about the reform. This necessary consultation, particularly in the context of the totally exceptional developing economic situation, is greatly assisting the development of detailed legislative proposals.
Additional information not given on the floor of the House
As I have said in the House previously, reform of our personal insolvency regime is not a simple task. It is a very complex area of the law and one where the consequences and implications of new policies need to be very carefully assessed. There is a delicate balance to be struck between the various legal rights of the parties involved. We must design a system which is fair to both creditors and debtors alike. Not to do so would make worse a situation that is already difficult for the parties concerned.
The reform of bankruptcy law will invariably focus on the length of the discharge period that will apply to the person adjudicated bankrupt. We debated this point in the House during the passage of the Civil Law (Miscellaneous Provisions) Act 2011 in July. Opinions varied as to the appropriate period. There was consensus that the one-year period that applies in the UK and Northern Ireland is too short, but anything beyond five years is too long, particularly if the bankrupt person has been fully compliant and not behaved fraudulently in any way. No final decision has been taken by the Government in this regard.
The quantum of debt that might be discharged in any new bankruptcy or personal insolvency arrangements has also yet to be decided. In bankruptcy, the debtor’s assets are fully realised for the benefit of creditors and that responsibility falls to the official assignee or a private trustee in bankruptcy. It is not, in my view, realistic to, at this stage, attempt to set down the quantum of debt that might be agreed to be discharged in the context of a non-judicial debt settlement. That would be a matter for the parties concerned. We must be mindful that in any debt arrangement, the debtor or bankrupt must be left with sufficient income to meet reasonable living expenses. Given the complexity of the personal over-indebtedness issue generally and the economic and financial implications of any changes to the personal insolvency system, these are matters which will require careful consideration by the Government.
Deputy Stephen Donnelly: It is good to hear that the Minister will not only meet but introduce the Bill ahead of the IMF timeline set. Specifically with regard to mortgages, the ideal situation would be that the bankruptcy conditions contained in the new legislation would be such that it could be used as a credible threat and, therefore, the person concerned would not necessarily have to go through bankruptcy but could say to the bank that if pushed too hard the person would be declared bankrupt and that the bank should, therefore, reach a settlement.
An Leas-Cheann Comhairle: A question please, Deputy.
Deputy Stephen Donnelly: The Minister mentioned five years in this context. As Minister for Justice and Equality what is his view on five years versus three years, one year or two years? When the Minister publishes the legislation and gives a recommendation on the number of years, will he also publish a comparative analysis that shows what works in other systems and why he has reached the recommendations that he has?
Deputy Alan Shatter: There are difficult decisions to be made in this particular area with regard to the number of years. It is not a matter of my personal preference. It is a decision that the Government must make.
The period for bankruptcy and extricating from bankruptcy, for example, in England was reduced to a period of one year. In other states there are different periods of years. There are a number of issues that must be considered in this context. We must ensure that bankruptcy is not used by individuals to evade debts fraudulently. There are those who owe money and those to whom money is owed and the position of both debtors and creditors, and the impact on their lives of the structure we put in place, must be considered.
We are giving careful consideration to how to proceed, both in the context of what I would describe as non-judicial means and also the judicial means of dealing with insolvency. There is a range of different options with regard to arrangements that may be entered into voluntarily with creditors and arrangements that may ultimately require an adjudication in a bankruptcy context.
I do not want to pre-empt the decisions to be made by Cabinet other than to say we are moving ahead carefully in this, but we also must be aware of unintended consequences that could arise that could have a detrimental impact on taxpayers in the State generally. This is a particularly complex area in the context of the unprecedented fiscal difficulties confronting the State and the banking difficulties with which Deputy Donnelly is intimately familiar.
Deputy Stephen Donnelly: Will the Minister publish a comparative analysis and the rationale for whatever he does agree?
On the second piece to which he referred in his reply, when the discharge period is ended, is it the Minister’s position that the full quantum of debt owed at that stage will essentially be written off?
Deputy Alan Shatter: The reason for publishing heads of Bills once the Government has given detailed consideration to the applicable principles is to afford Members of the Oireachtas Joint Committee on Justice, Defence and Equality, and also Members of the House who wish to attend a meeting of that committee, time to consider them and to give their own input also into the substantive provisions that we ultimately adopt, bearing in mind not only the Keane report and the Law Reform Commission’s recommendations, but the comparative approaches taken in other jurisdictions. Deputy Donnelly will have every opportunity to engage in that way and I hope that a positive contribution is made by that committee. There is no monopoly of wisdom in this area but there is an urgent need for change.
Question No. 41 answered with Question No. 39.