Seán Kenny (Dublin North East, Labour)

I very much welcome this Bill, which is one of the most significant Bills that has come before the 31st Dail. The Bill provides for comprehensive reform of insolvency law and practice. It provides for new, more flexible options to address the circumstances of insolvent debtors and it addresses the obligations of debtors and the rights of creditors in a proportionate and balanced way, taking into account the financial reality of individual circumstances.

The development of modern insolvency law is a key commitment in the programme for Government. It was also required by the terms of the EU-IMF programme of financial support for Ireland. The reform also takes into account recommendations made in the interdepartmental working group on mortgage arrears report of October 2011, the Keane report. That report states: "The early introduction of new judicial and non-judicial bankruptcy options is vital. Without effective bankruptcy legislation the mortgage arrears problem will not be resolved." The general scheme of the Bill was published for consultation by the Government on 25 January. Several important submissions, in particular the report of the Joint Committee on Justice, Defence and Equality, of which I am a member, were taken into account in the finalisation of the Bill.

Essentially, the Bill provides for the reform of personal insolvency law and will introduce three new non-judicial debt resolution processes. The first of these is the debt relief notice which will allow for the write-off of qualifying unsecured debt up to €20,000, subject to a three-year supervision period. The Bill also provides for a debt settlement arrangement for the agreed settlement of unsecured debt over five years, and the personal insolvency arrangement will enable the agreed settlement of secured debt up to €3 million - although this cap can be increased with the consent of all secured creditors - and unsecured debt over six years.

The Bill makes provision for enhanced oversight of the three new debt resolution procedures by the Circuit Court or the High Court where the debts concerned are in excess of €2.5 million. The Circuit Court will receive the debtor's case file from the insolvency service with an application for a debt relief notice or a protective certificate in respect of a debt settlement arrangement or personal insolvency arrangement.

The court's consideration or hearing will take place on an ex parte basis and neither debtor nor creditor will be required to be present, with no time delays or costs incurred. I very much welcome that. This efficient procedural approach is repeated at the conclusion of the three-year supervision period for the debt relief notice or on the conclusion by the parties concerned of a successful debt settlement arrangement or personal insolvency arrangement proposal prior to its formal registration. A court hearing will only be necessary subsequently where a creditor objects on one of the grounds specified in the legislation. This is consistent with the approach recommended by the Law Reform Commission.

This enhancement of court involvement has the significant benefit to the debtor of providing protection from enforcement actions by creditors, either during the negotiation period or during the lifetime of the arrangement. It is likely that debtors would be the subject of judgments obtained by creditors. In addition, the involvement of the court also ensures our new processes will be capable of meeting the criteria in regard to the European Union insolvency regulations and will recognise cross-border insolvency procedures.

The Bill will continue the reform of the Bankruptcy Act 1988, which got under way in the Civil Law (Miscellaneous Provisions) Act 2011. The critical new provision is the introduction of automatic discharge from bankruptcy, subject to certain conditions, after three years in place of the current 12-year arrangement. We have seen high profile cases recently of what is called "bankruptcy tourism", the most notable in my constituency being the case of Mr. Tom McFeely, the Priory Hall developer. Will the Minister clarify how the Bill will affect this type of behaviour in future?

The insolvency service of Ireland will be established to operate the new insolvency processes and provide a focal point for development of insolvency policy. Organisation and planning for the new service is under way and I understand the director designate will likely be appointed during the summer. However, as the new service will administer a completely new approach to insolvency in the State, with new and complex legal provisions, it is going to take time to become operational. I understand the concerns of those who want an immediate introduction but it is better to the get the service right rather than rush it, which has happened all too often in policy formation in Ireland.

The provisions of this Bill will require careful consideration by all those involved in it. However, individual circumstances vary and the solutions found within the context of the debt settlement arrangement and personal insolvency arrangement processes will also vary. It should be emphasised that the Bill makes clear that those persons experiencing debt difficulties should primarily engage with lenders and negotiate an appropriate settlement.

I emphasise the Bill makes it clear that those experiencing debt difficulties should primarily engage with their lenders to negotiate an appropriate settlement. Lenders should also engage properly with customers. There is no question of the Government forcing settlements on either debtors or creditors. Such an approach would run into legal and constitutional difficulties. The new debt settlement arrangement and personal insolvency arrangement processes described in the Bill facilitate a voluntary deal between a debtor and a specified majority of his or her creditors. We should not forget many different creditors may be potentially involved in the new processes. Many persons or companies may be both debtors and creditors. While I understand the strong antipathy towards financial institutions and their contribution to our current economic difficulties, we must not lose sight of our objective, which is to introduce reformed, workable and balanced insolvency legislation. Such legislation is a required feature of any properly functioning economy. It will assist not only debtors and financial institutions, but also corner shops, tradespersons and local co-operatives.

All debtors and creditors are concerned by this reform. For their sake and the sake of the wider economy, all must be treated fairly. Many individuals are in personal financial difficulty because of the failure of other individuals to pay for work properly completed or goods or services supplied to them. The underlying philosophy of the debt settlement arrangement and personal insolvency arrangement is that the insolvent debtor will, with the assistance of a personal insolvency practitioner, put forward what he or she considers to be a realistic offer to his or her creditors which would restore the debtor to solvency within a reasonable period while at the same time giving creditors a better financial outcome than the alternatives of debt enforcement or bankruptcy. The creditors will need to consider carefully the debtor's offer, conscious that if they refuse, the debtor has another option, namely, the standard debt discharge procedure available under the reformed bankruptcy laws. This is the ultimate appeal mechanism of the debtor. However, in this eventuality - which is best avoided - control is effectively lost by both sides. It would make sense for the debtor and creditor, especially where there is only one main creditor, to seek to conclude an agreement together. The reforms contained in the Bill, in addition to providing new legal remedies, provide a significant incentive for financial institutions to develop and implement realistic agreements to resolve debt issues with their customers.

The provisions relating to a debt settlement arrangement or a personal insolvency arrangement are specifically designed, as far as is practicable, to facilitate a debtor's continued ownership and occupation of his or her principal private residence, unless the debtor does not wish to do so or the costs of the debtor continuing to reside in it are disproportionately large.

The issue of reasonable living expenses is of particular importance in the application process for debt relief notices. I dealt with a harrowing case at my advice centre yesterday and unfortunately such cases are all too common. Where an applicant has a disposable income of less than €60 per month after allowing for reasonable living expenses, and assets and savings of less than €400, with exemptions for essential household or work items and a vehicle worth up to €1,200, he or she will be entitled to a presumption of qualifying for the debt relief notice by the insolvency service in making its determination.

I hope the provisions contained in the Bill will act as a catalyst for honest, open and constructive engagement between unsecured and secured creditors and those in genuine substantial financial difficulty. The Bill provides concrete options for those genuinely unable to discharge their financial obligations as opposed to those who can but will not do so. I commend the Bill to the House.

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