Ann Phelan (Carlow-Kilkenny, Labour)

I warmly welcome the opportunity to speak on this important Bill before the House today. This is possibly the most important legislation that we will pass in this House over the course of the Government's lifetime. It will deal with the appalling legacy of the previous Administration and highlights how banking regulation must be of paramount importance.

The Personal Insolvency Bill establishes a non-judicial debt settlement system and sets up an independent body called the insolvency service to oversee this system. It also radically reforms the length of bankruptcy from 12 to three years. I commend the Minister on bringing this landmark legislation before the House and taking action on the debt crisis which affects so many people. It is a complex and radical reform of our laws governing debt and bankruptcy and, in so doing, forms one part of an overall solution that we are working on to deal with the problems of unsustainable debt, be it mortgage or personal.

The debt levels experienced by people are leaving them feeling vulnerable and unsure as to how they can cope. Many are especially concerned as to how they are going to keep up with their mortgage repayments, thinking that if they fall behind they will lose their family home. As we know a man's house is his castle. These people are the backbone of our society. They are the ones who have worked hard and grafted but, because of the economic downturn, now feel isolated and alone in their struggles to try and meet their financial commitments. They are real people facing real problems, often not able to see a way out of the predicament in which they find themselves. They are in a suspended state of animation of debt which has a paralysing effect on the mind and soul. These are the people who are in dire need of our help and this Bill will help. It will not solve the problems on its own but it will play an important part in setting up a debt resolution process.

One mainstream bank recently disclosed that the percentage of its mortgages in arrears of 90 days or more continues to rise and is expected to continue to escalate into next year. Years of reckless behaviour by the banks have led this country from a period of relative prosperity to one where international financial help was required to help us out. Once the economy hit the slowdown and people started losing their jobs, then the real pressure became evident. People were faced with loans they could not pay back and mortgage repayments they could not meet. We have all heard the horror stories from our constituents.

The Personal Insolvency Bill is one part of the solution. Our programme for Government stated we believe more protection is needed for home owners with distressed mortgages and it invokes a process of putting people ahead of the banks and the developers. Indeed, Labour's manifesto stated it was an absolute priority to keep people in their own homes. However, we must offer protection for those who cannot pay, not to those who will not pay. Blanket debt forgiveness is not on offer.

When passed into legislation, the Personal Insolvency Bill will introduce three new non-judicial debt resolution processes. These will depend on the circumstances of each case. Those finding it hard to pay their debts will meet with a personal insolvency practitioner who will then mediate the best way forward. I agree with Deputy Maureen O'Sullivan that we should resist abbreviating that title to PIP as it would not convey the importance of the job. I would suggest the excellent Money Advice and Budgeting Service, MABS, be also actively involved in this process. However, and this is key, there must be engagement from both sides in this process for it to work to the maximum effect.

There will be a debt relief notice to allow for a write-off of qualifying debt, subject to a three-year supervision period. There will also be a debt relief arrangement for the agreed settlement of unsecured debt over five years. There will be a personal insolvency arrangement for the agreed settlement of secured debt up to €3 million, although this cap can be increased if both parties agree, and unsecured debt over a period of six years.

The success of the Bill depends on the interaction between borrowers and lenders. I call on both parties to be as open and honest as possible in order for this incisive legislation to work. I congratulate my colleague, the Minister of State at the Department of the Environment, Community and Local Government, Deputy Jan O'Sullivan, on the introduction of the mortgage to rent scheme, which, in conjunction with the Bill before us, will further ease the financial burden on so many families throughout the country. This scheme will also allow people to resolve their financial difficulties and remain in their family homes. I again commend the Minister for Justice and Equality for introducing this innovative Bill, which is part of the solution required to get the country back on its feet.

See this speech in context