Pat Breen (Clare, Fine Gael)
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As well as being in mortgage arrears many people have substantial unsecured debts and are struggling to pay off their debts because their incomes have reduced substantially since they took on the original debt. The debt settlement arrangements provided for in the Bill will allow such persons to apply to the insolvency service for a protective certificate while they are preparing a debt settlement arrangement. The biggest complaint of my constituents in this category concerns the unwillingness of the lending institutions to give them adequate time to sort out their affairs. This proposal will give people some breathing space as they try to resolve their situation.

The protection which the Bill offers for principal private residences in cases where individuals have entered into a personal insolvency agreement is something for which people have been waiting for some time. Repossession orders should be a thing of the past. Repossessions are in nobody's interests, especially in a period when house prices are falling. While the lender might recoup some finance from the sale of a repossessed house, the entire process is extremely traumatic for the families involved and in any case it is the taxpayer who ends up picking up the tab for those who have to be rehoused by local authorities or through the payment of rent supplement.

The family home is hugely important to Irish people. It may be as a result of historical experiences that this country is ranked sixth in the world in home ownership, with economies such as the United Kingdom, the United States and Germany. The statutory duty placed on the insolvency trustee ensures that in preparing the personal insolvency agreement the debtor will be allowed to remain in his or her own house. That is a significant move which will ease worries for families living with the threat of eviction.

I wish to address the proposals set out for the new insolvency service. It is proposed that the necessary resources be given to the service in order that it can deal with the scale of the applications likely to come before it once the legislation is enacted. I would like to see the MABS involved in the process. I welcome the Minister's commitment that it will continue to have a valuable role in assisting and advising people with debt problems. I cannot speak highly enough of the professional advice and financial statements produced by it to support people in trouble and I am pleased that it will have a role in the new system.

It is important that the financial institutions buy into the new insolvency legislation. I appeal to them to embrace it and work with us in that regard. I meet families every day who are struggling to pay their debts and I am conscious of the pain and upset they must endure. The legislation provides a lifeline for them. People are most anxious to have the provisions in the Bill enacted as soon as possible. I, therefore, appeal to the House to support the legislation.

Anthony Lawlor (Kildare North, Fine Gael)
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I welcome the Bill which is a positive step in dealing with the financial crisis in which we have found ourselves in recent years. Many have been waiting a long time for legislation such as this. One of the first people who spoke to me following my election asked me whether it would be possible to do something about the bankruptcy laws. The Bill is a welcome step in that regard.

I frequently refer to the language used in Bills. All constitutions stem from the Magna Carta, which was issued back in 1215. I believe the Magna Carta must have been written by a barrister or a lawyer because it was written in Latin, which was a dead language at the time. It was then translated into the vernacular, which in England happened to be French, before being translated into English. I often wonder in what language some of those who write the Bills that appear before the Oireachtas work. In this context, I again mention section 97(6), which includes a sentence of 367 words. I do not know the person who wrote it but most of us who were obliged to write essays for our leaving certificate examinations would easily get two essays out of that single sentence. I know people who may have fallen asleep by the time they got half-way through it and would have been obliged to focus on it again. I again plead for the language used in Bills introduced to the Oireachtas to be made as simple as possible in order that ordinary Joe Soaps like me may be able to understand it.

I also have a couple of suggestions with regard to the Bill, the first of which pertains to the debt relief notice. Such debt relief notices will allow for write-offs of up to €20,000 and specifically are being provided for those who have no assets and no possibility of paying back the loan. Under a debt relief notice, one is liable to be under supervision for three years. Many young people were caught up in the tide of the Celtic tiger and now find themselves in a position in which they are in debt. Some of them may only owe €5,000 or €6,000 but have no means of paying it back. However, if they avail of a debt relief notice, there will be an onus on them to be under supervision for up to three years. If possible, I suggest that this period be staggered. For example, for write-offs of up to €10,000, one might only be under supervision for a period of one year, for a write-off of up to €20,000, one could be under supervision for two years and for more than €20,000, one could be under supervision for a three year period. I specifically refer to those younger people who bought cars or who took out unsecured loans for holidays and so on and who now find themselves in a position whereby they cannot get out and move on with their lives for a period of time. I ask the Minister to consider the possibility of including such a measure in the regulations. Depending on the scale of what such people owe, the Minister might consider periods of one, two or possibly three years in the case of amounts of more than €20,000.

I have a major concern regarding the regulation of the proposed personal insolvency practitioners. The current crisis arose from much poor regulation of the banking system and my concern is that the regulation of personal insolvency practitioners might be weak. The Minister should strengthen whatever legislation or proposed regulations he has with regard to the aforementioned practitioners. My fear is that certain individuals, who would not be fit for purpose as personal insolvency practitioners, would manage to advise people. My concern is the advice such people gave in the past may have led to individuals getting into trouble, only for the former to now advise the latter on how to emerge from trouble.

I also have a slight issue with something that got many people into the position in which they now find themselves whereby they need this legislation, that is, some of the products that were sold by banks. While each individual person must make up his or her own mind with regard to what products to take from banks and what decisions to make with regard to financial security, banks sold and offered products to people who in no way were fit to make a proper decision about them and who in consequence find themselves in need of this welcome legislation.

I wish the Minister the best in respect of the passage of this legislation. It is a vital cog in the future of Ireland's economic recovery and I will support the Bill in its passage through the Dáil.

Maureen O'Sullivan (Dublin Central, Independent)
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While considering the literature on this topic, I was struck in particular by the nine key principles drawn up by a number of highly reputable organisations with a strong track record and a strong commitment to working with people. I refer to organisations such as the Free Legal Advice Centres, FLAC, the Society of St. Vincent de Paul, Focus Ireland, Threshold and Respond!, to name a few. Basically, their call is for a fair and equitable response that really gets to the heart of this issue. We live in a society and time of excessive indebtedness, courtesy of the Celtic tiger and the pressure to buy into the excesses of that time. I completely acknowledge the principle of personal responsibility for decisions that everyone, as individuals, make. I grew up at a time when money was scarce and there was a struggle to make ends meet. People saved out of extremely limited resources and bills were paid, if not on time then eventually, and it was a time when many people, particularly where I lived, did not have bank accounts. I remember the efforts of family members and friends to save for the deposit on a house, which is markedly different from the position today.

Today, one sees a society that is crippled with this excessive indebtedness and I was struck by a quote from the Governor of the Central Bank, Patrick Honohan, a few months ago, when he stated: "Not all economic crises have left as substantial a legacy of personal debt as has the current global crisis." The organisations mentioned earlier perceive this as coming from an inability, rather than a lack of willingness, to pay on the part of those in debt. Their principles also included a call for comprehensive information to quantify the extent of the debt problem and for solutions to take into account all debt liabilities in order that they would be workable. In addition, they called for the personal insolvency legislation currently under discussion. Another principle is that the insolvent debtor should pay to the best of his or her ability for a limited time period and then for the remaining debt to be written off. Moreover, those in debt need to have someone to represent their interests when negotiations are under way because such negotiations can be extremely difficult. In addition, they need a minimum income to meet their basic needs while repaying the debts. On the latter issue of a minimum income to meet people's basic needs, discussing basic needs is a matter of interpretation and I go along with some of the NGO organisations in this regard. They also called for the unsustainable mortgages to be recognised as such and that when repossession occurs, for appropriate housing to be provided. However, before that, which makes sense, the State should try to keep people in their homes with the ongoing mortgage or as tenants. I believe all these principles are sound and can be supported.

If one considers particular aspects of excessive indebtedness, those who cannot pay their essential living expenses and debt repayments as they arise are at the heart of the problem. Moreover, it is not just about mortgage arrears but is much broader because while I acknowledge personal responsibility, there are factors that go beyond the personal, such as unemployment, businesses collapsing and ill-health. During the so-called good days of the Celtic tiger there is no doubt that people over-extended. I can recall receiving letters through the post from banks asking whether I wanted €10,000 that day, and at one point I believe I was being offered €20,000. As for the mortgages that were on offer, they were not merely 100% mortgages with no deposit upfront. People also were asked whether they needed further capital for furniture, decking out the back or a conservatory, as the financial institution would throw in a few thousand more. While it was extremely tempting for many people to opt for instant gratification, the consequences are known. As for property portfolios, I can understand the person who bought a second property as a pension fund. However, I find it difficult to find sympathy for those who went really gung ho for X, Y or Z number of properties. In my constituency of Dublin Central, in common with other constituencies I am sure, there is a preponderance of rogue landlords, that is, property buyers who are causing untold damage to long-established communities with their disregard for all planning and environmental laws and regulations.

This constitutes one of the excesses of the Celtic tiger. Only this week, I was asked to visit a flat in the inner city, which is privately owned by a landlord. I believe I may still be in shock at the conditions in which people were living, as my dog has much better accommodation than do they. Such rogue landlords also were created by the banks because of the extent of borrowing available. The priority must be to protect the individual at the other side, whose home is under threat. The institutions, that is, the banks and financial companies, are the primary causes of the excessive indebtedness one now sees, as well as the inaction and disinterest of those who should have known better, which also was a major factor. Those who should have known better in fact were fuelling this via the tax breaks and tax incentives and by ignoring completely best economic advice, both in Ireland and abroad.

Many who are excessively indebted have lost jobs and businesses and are trying to live with considerably reduced resources. In consequence, they lack the capacity to repay loans or pay the bills or both, which is a nightmare situation. While it is one thing to come from nothing to something as a progression, to come from a lot to nothing is a completely different scenario. I have in mind areas in Dublin Central and in the inner city in which people tell me the Celtic tiger passed them by. They did not get into the excesses and did not buy the additional properties here and abroad.

They did not buy big cars, go on shopping trips to New York and three and four holidays per year. They did not benefit from the Celtic tiger, but they are now suffering more owing to the economic downturn. The defunct Christmas bonus is an issue for elderly inner city residents, as that is all many of them got from the Celtic tiger and it is now gone.

The statistics show that at the end of 2010 one in ten residential mortgages was in trouble. A few months later one in nine was in trouble and a few months after that one in eight was struggling. There is still a significant number who have the ability to pay, but I know that some within this group are just about managing to repay their mortgage. We think of the property bubble when people were encouraged to buy with various inducements, not to mention the very strong media and financial institutions hype which suggested that if people did not get on the property ladder, they never would, as prices would continue to rise. People took out mortgages sometimes of over €250,000, €300,000, €400,000 and more to purchase houses and apartments that they knew were probably worth half of what they were paying. There was false advertising and incorrect advice, but who is being accountable for this? We know that those who are paying are the ones in negative equity.

The number of voluntary surrenders or abandonments in one period is greater than the number of repossessions. We know that there are long waiting lists for social housing; therefore, people have no option but to return to the rented accommodation system that I described, although I acknowledge that there are some landlords with ethical standards. Some mortgages are just unsustainable and the mortgage interest supplement could be used more effectively. Central to the issue of mortgage resolution is keeping people in their homes and avoiding placing additional pressure on the local authorities such that people avoid the nightmare that is the private rented sector. Options include availing of the mortgage to shared equity and the mortgage to rent schemes. The former involves the State purchasing a dwelling at a substantial discount from the lender and then allowing payments in instalments in such a way that the current financial situation is taken into account, as well as the option for the person concerned to buy back if and when his or her situation improves. The mortgage to rent scheme brings in the housing association or local authority and the former owner becomes a tenant paying rent that he or she can afford. I know some have reservations about this scheme. Another group which needs protection includes those tenants in buy-to-let apartments in cases where the owner-borrower is in danger of having the building repossessed.

I share the concerns of others who have spoken about the review process and think ten years is too long. It should take place sooner because so much is at stake. There will be a new body - the Insolvency Service of Ireland - with a director and staff. There will be yearly reports, strategic and business plans going to the Minister and then the Oireachtas. The director may be called before the Committee of Public Accounts, but I wonder if there is a need for the director to go before a committee when requested to do so. The name personal insolvency practitioners - PIPS - is not conducive to highlighting the serious role they will play. They will be vital in the operation of the debt resolution process. I presume they will receive extensive training and that there will be an extensive oversight procedure. The banks' veto is of concern and I hope the insolvency service can work through it to the benefit of those in debt. Let us suppose the banks do not want to buy into this process. That is an issue that will have to be dealt with.

As the Bill is complex and the language inaccessible, I hope the people in debt will be able to understand what is available. Perhaps there is a role for FLAC and the citizens advice bureaux to play. An additional worry for some is the social welfare supports. Yesterday or today I read a press release from the European Anti-Poverty Network which highlighted the serious failure of the European Union's 2020 strategy to promote coherent anti-poverty strategies. The quote is that there is a steady slide towards more poverty, exclusion and inequality for the majority.

I wish to be sure that the homeowners and their families who are truly in debt will be the ones who benefit most from the Bill, not those with the large investments and the property portfolios. The publication of the Irish League of Credit Unions "What's Left" contains some interesting statistics. It states mortgages and rents continue to be the most expensive bills, followed by groceries, utility bills and transport costs. It tells us that half of all consumers struggle to pay all their bills on time, but it is very distressing to read that there are 1.82 million adults across Ireland with less than €25 left per week after they pay their bills. As reckless banking led to personal recklessness, I am not sure why we are not going down the road of calling for a financial transaction tax and going back to the idea of a Tobin tax. Such as tax could generate massive amounts of money in revenue. It would have to be done globally and simultaneously, or else we would have speculators moving to those countries with fewer tax reductions, as they do today.

During Private Members' business last night we dealt with the Consumer Credit (Amendment) Bill 2012 and the issue of moneylenders. There are two varieties of moneylender - licensed and unlicensed. There are problems with both and unless the banks get it right, there will be greater recourse to these moneylenders, in spite of the best efforts of the credit unions which do a great job in encouraging saving, no matter how small the amount is. For every €100 borrowed, one particular licensed moneylender charged €56 for one year. Therefore, the APR on a six month loan is 187.2%. One can only imagine what illegal moneylenders charge. From discussions with community workers and others, we know that once the moneylender moves in - licensed or unlicensed - it spreads like wildfire. People are in need of what is known as doorstep credit because there will be emergencies and they will need cash quickly, but not at what it will cost them. A major problem in parts of Dublin Central is that families are borrowing money to pay the drug debts of family members. It is vital, therefore, that people who need money and are in debt can avail of funds in an equitable way.

Any Bill has to be measured by how good it is for citizens. There is much in this Bill that is good for citizens, with a few reservations.

Michael Kitt (Galway East, Fianna Fail)
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The next speaking slot is being shared by Deputies Ciara Conway and Ann Phelan.

Ciara Conway (Waterford, Labour)
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I congratulate the Minister for publishing the Bill which deals with a very complex issue. It is great to have an opportunity to discuss it in the House before the term finishes.

The last Administration left behind an appalling legacy, with crippling debts being saddled on the shoulders of citizens. After 15 years of mismanagement, we finally have radical and workable legislation to deal with the debt crisis The Bill reforms legislation which has been in place for over a century and seeks to ensure that in coming years there will be better structures in place for all families, not only those in difficulty. Struggling homeowners will be able to enter into arrangements, on meeting certain criteria, with their lenders to have some of the debt restructured. There will also be options to allow families and individuals to remain in their own homes. That is the crux of the issue for me.

The major concern of the people we meet in our clinics and who contact our offices is that pressure was put on young people to take out huge mortgages. The couch, the decking and the car were thrown in and now young families have been saddled with debt to be paid off in the next 30 years. This can only be described as poor practice by the banks. When I first went to obtain a mortgage, I was told I would rent a room in my house. There is not a huge or thriving rental market in Abbeyside, Dungarvan, County Waterford, as we do not yet have a university. There were inappropriate practices which put pressures on ordinary everyday people. Banks faced with the prospect of non-payments know they must engage with borrowers. In my experience, the banks are doing what they are supposed to be doing on paper. They enter into a MARP, mortgage arrears resolution process, agreement with borrowers but lump more arrears on top of it which puts the payment completely out of the reach of the borrower.

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. We do have a duty to ensure the language used in the legislation is distilled down so that people will know what it means to them. Part of our role in this debate is to use accessible language. While I accept there needs to be legalese and words are chosen carefully when drafting legislation, people need to be able to filter out the provisions that affect them.

The Bill introduces three new non-judicial debt resolution processes. The debt relief notice will allow for the write-off of qualifying unsecured debt up to €20,000, subject to a three-year supervision period. The Bill provides for a debt settlement arrangement for the agreed settlement of unsecured debt over five years. 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 outlines several avenues that can be pursued by people in debt. The inclusion of both secured and unsecured debt, through personal insolvency arrangements, is seen as placing Ireland to the forefront of states seeking to address the devastating impact of unsustainable debt by providing for settlement arrangements of both types of debt at the same time. It must be remembered that unsecured debt of credit cards and cheap credit is a significant burden to many families across the country and causes much stress.

Labour has consistently and clearly promised that it would introduce legislation to assist those struggling to pay their mortgage, deal with their credit card debt or other personal debt. This legislation is delivering on this promise as outlined in the programme for Government. It is not, however, a blanket debt forgiveness scheme. It has been put in place for those making an honest effort to pay their debts but can no longer afford their repayments. A key principle of the Bill is that it is not about the size of the debt but rather the affordability to service it.

There is no one-size-fits-all solution and each case will be dealt with on an individual basis. The legislation addresses the obligations of debtors and the rights of creditors in a proportionate and balanced way while taking into account the financial reality of individual circumstances. I look forward to working with the Minister and my other colleagues in government to ensure the speedy passage of this Bill so its provisions can assist the many families across the country affected by debt.

Ann Phelan (Carlow-Kilkenny, Labour)
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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.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Many thousands of families and households have been eagerly awaiting the Bill before the House. I welcome the fact that we have at least been presented with legislation in order that we might engage in a debate on the most important issue facing the 70,000 or so people who are in mortgage arrears, those whose homes are in negative equity and individuals who are experiencing severe distress as a result of personal indebtedness. As already stated, those to whom I refer have been awaiting legislation to deal with the problems they are experiencing. Many of them are in impossible, even unsustainable, situations.

The stakes are very high for the people in question, namely, those who are at the sharp end of the crises relating to mortgage arrears and personal indebtedness. However, the stakes are also high for our entire society. The scale of the mortgage arrears, mortgage distress and personal indebtedness to which I refer is probably one of the key reasons that recovery, growth and demand in the wider economy are being smothered. People who are at their wits' end trying to pay off mortgage or other debts - they really cannot afford to do so - are obviously not going to be in a position to spend much money in shops, retail outlets, etc., which are crying out for customers and which are going out of business at a rate of knots. Everybody in the country has a stake in resolving this problem in a fair, just and sustainable way, to provide some hope and relief to those who are in trouble and to lift the massive burden of debt that is smothering the economy.

In so far as it at least proposes to establish some sort of system to deal with indebtedness, insolvency and mortgage distress, the Bill is welcome. As a result of its introduction, we will now have an opportunity to examine and debate all of the issues relating to this gravest of problems with which we are faced. Having said that, however, my difficulties with the legislation begin almost immediately. The Oireachtas Library and Research Service does all Members of the Houses a great service by producing Bills digests. It is both interesting and telling that the digest of the Bill before the House begins by referring to the context of its introduction. The context set out by the Oireachtas Library and Research Service is the need to update the legislation relating to personal insolvency due to the fact that the current system is wholly inadequate and, in fact, virtually non-existent. The digest also states that laws which stipulate that people must remain bankrupt for 12 years are extremely punitive in nature and just do not fit the current situation. In so far as the digest puts this forward as the legislative context in which the Bill is being introduced, this is true. However, the digest misses out on the fact that we are faced with a bigger and more immediate emergency which does not really have anything to do with a failure to update legislation and which came about as a result of the extraordinary behaviour of the banks, mortgage lenders and developers and of the political class which facilitated them in pumping up a property bubble. Those to whom I refer were driven by greed and when the bubble they created burst, it literally crashed our economy, ensuring that tens of thousands of people were left in the kind of desperate circumstances to which I refer.

The Bill, in both its provisions and its general thrust, does not acknowledge the extraordinary circumstances that led to the creation of the crisis in which we find ourselves. What we are doing here is not just updating legislation for the modern era; we are required to take emergency measures to deal with an absolutely remarkable situation that developed in this country between 2002 and 2008. In my opinion and, I suspect, that of many others, the victims of the crisis were not at all responsible for its creation. The normal rules and provisions of insolvency legislation, regardless of whether they are updated, are not actually the issue here. This is not a case in which people who borrowed too much and should have known better find themselves in trouble, obliging us to enact legislation to give them a second chance. Insolvency legislation is normally supposed to deal with such eventualities. However, we are not dealing with those eventualities.

I accept that we need legislation to deal with insolvency, and this Bill at least moves us one step in the direction of dealing with the types of situation that can arise at any time. However, we are not dealing with such situations; rather, we are dealing with a specific crisis involving exceptional circumstances that were created by a golden circle of bankers, developers and politicians. The Bill before the House fails to deal with that crisis because it does not acknowledge the crucial and informing context I have outlined. Even though it is not directly relevant to the Bill, it is important to note that the crisis to which I refer has been massively exacerbated by huge increases in unemployment - brought about, of course, by the financial crisis created by the golden circle of bankers, developers and politicians. One could add the ECB to that golden circle, particularly in the context of its policies on interest rates, etc. Increases in unemployment have compounded the effects of the financial crisis and made them even more disastrous in nature.

If the Bill were to acknowledge the existence of the crisis to which I refer, it would stipulate that we need to take emergency or exceptional measures in order to write down the debts that were incurred by those who took out loans in order to put roofs over their heads or deal with the circumstances that prevailed in the period 2002 to 2008. The people to whom I refer are the victims of a crisis that was created by others, and they took out mortgages that have proven to be utterly unsustainable. All these individuals were trying to do was to put roofs over their heads, but they were doing this in a market that was rigged. If we were acknowledging that, we would allow mortgage debt that was incurred during that period to be written down to current market values, or at least to pre-bubble levels. Then we could start to consider what was reasonable borrowing and what insolvency mechanisms should be put in place. There is a bigger context, however. The crisis resulted from what went on between 2002 and 2008. The situation people found themselves in at that time was not of their own making. It has landed us in a catastrophe, just as it landed them in a catastrophe. In my opinion, the portion of such debt that was artificially created by the greed of a few should be subject across the board to a system of debt write-down or forgiveness. I would not include in such a scheme those who were involved in obvious speculation for greed in the commercial property area, or who bought large numbers of properties to rent out in the hope of making a killing in the market, or who speculated on continuously rising property values during that period. I do not believe such people deserve any forgiveness. Some people were doing nothing more than trying to put roofs over their heads, which is a perfectly legitimate thing to want to do at any time. They took out loans that subsequently turned out to be unsustainable because they believed that if they did not get on the ladder at that time, they would never be able to do so. Such people deserve our forgiveness, if that is the right word because it is not as if they did anything wrong. The portion of their debt that relates to the bubble period should be written down.

I will give the House an example of a better legislative model that we should adopt. The legislation that was introduced in Norway after a similar property crisis in that country in the mid-1990s puts the Bill before the House to shame. The Norwegian insolvency legislation had three main elements, all of which are lacking in this Bill. First, a guarantee of the right of the home owner to his or her home - to be housed in his or her own locality - was written into the Norwegian legislation. It was not left up to the banks, made subject to negotiation or suggested that it might or might not happen. It was written into the legislation that the chief imperative of the laws of the state was that people should stay in their own homes. It provided that people were entitled to decent quality housing in their own localities. Second, the Norwegian personal insolvency arrangements defined what "a reasonable standard of living" was, something this Bill does not do. The various arrangements proposed in this legislation will allow the lender or mortgage holder a reasonable standard of living, when such an arrangement is established, but they do not define what that entails. What do we think the banks, which will have a veto, will consider to be a reasonable standard of living? We can be pretty sure they will push for the standard to be very low, perhaps along the lines of our level of social welfare.

The chief imperative for the banks will be to get their money back. That was confirmed to me by the heads of Permanent TSB in the last hour or so at a meeting of the Joint Committee on Finance, Public Expenditure and Reform. We asked them about the priorities of the bank when it deals with people who have distressed mortgages. We heard lots of noble words of concern about the plight of people, etc. When they were pushed, they said their mandate is to protect the capital base of the bank. That is what we heard explicitly in finance committee just now. That is what the banks we have recapitalised are interested in. They see the protection of their capital base as their chief priority. They do not want to protect the right of the home owner to his or her home, or to a reasonable standard of living. They want to protect their capital base. That means the pressure-----

Brian Hayes (Dublin South West, Fine Gael)
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That is good news.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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No, it is not.

Brian Hayes (Dublin South West, Fine Gael)
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They did not do that in the last decade. We need them to get the money they are owed.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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They have always been interested in protecting their profits. There is no change in that regard. This legislation will give the banks a veto. The pressure will always be on them to get as much as they can, even if it does not leave the borrower with a reasonable standard of living, or with his or her home. Any proposal that is made by the borrower or the personal insolvency practitioner can be vetoed by the bank. The bank has the whip hand. This Bill will not enshrine in law the supreme right of the householder or borrower to a roof over his or her head in his or her own locality, and to a reasonable standard of living that is properly defined. In Norway, the independent assessment agency, which is called the "personal insolvency practitioner" in our legislation, has the whip hand. That body can impose a resolution on the bank. The bank does not have a veto in Norway. An independent body decides what is a reasonable arrangement for the repayment of a loan and what is reasonable standard of living. It has as an imperative the requirement to try to keep a roof over the person's head. It can impose a settlement on the bank. That is the critical difference.

Under our proposed legislation, if borrowers or householders are not happy with what banks are proposing to impose on them, the only choice they will have will be bankruptcy, which will involve losing their homes. They will be able to walk away after three years, but they will have lost their homes. We should not say that losing one's home and enduring three years of bankruptcy is a cakewalk. It is better than 12 years, but it is not a cakewalk. It is not an option that people will take up easily. In light of the chief culpability of the banks in creating this crisis in the first place, why does this Bill give the banks the whip hand? It is even more extraordinary given that we are recapitalising the banks. We really need to tease this out. I hope it happens during this debate.

When representatives of Permanent TSB were at the Joint Committee on Finance, Public Expenditure and Reform just now, I asked them about their relationship with the Government. We have recapitalised Permanent TSB. We are the main shareholder - the only shareholder - in Permanent TSB and the main shareholder in AIB, etc. When we debate what the banks are doing, having been recapitalised, we are told the Government is not very happy with the way they are doing things - how they are treating customers and what they are doing with standard variable mortgages, etc. There is an implication that there is nothing we can really do about these matters because the banks decide the policies. Perhaps we can say things to them, but we cannot determine their policies. That is how things are presented to the public. We are told about the terrible and nasty banks. I asked the chief executive of Permanent TSB about his relationship with the owner of the bank, which is the Government. He said he meets the chief stakeholder - the Minister for Finance - every month. Who is telling who what to do in this relationship? If the Minister for Finance is meeting the heads of Permanent TSB on a monthly basis or very regularly - I presume the same thing is happening in the cases of AIB and Bank of Ireland - why are we as the major shareholders not telling the banks what to do? Are we telling the banks what to do? If we are not happy with how the banks are dealing with distressed mortgage holders - we should not be happy - why are we not telling them to change their policies? If we are not happy with how they are dealing with standard variable mortgages, why are we not telling them to do it differently? The Government should answer these questions. This legislation essentially puts responsibility for dealing with this - the biggest problem - at one remove from the Government, on personal insolvency practitioners, PIPs, and insolvency agencies with no teeth. Ultimately, it gives the banks the whip hand and says they can veto anything.

I am not at all happy with the details of this legislation. People only qualify for debt relief if they have a disposable monthly income of more or less €60. That is very restrictive and is essentially saying that, unless one is absolutely poverty stricken, we will not provide relief on personal indebtedness.

In conclusion, major and radical amendment of the Bill is necessary. The only good thing is the recognition by the Government that we need a system to deal with insolvency but we need to radically amend the Bill to take the whip from the hand of the banks and to put, as the central imperative of the legislation, the need to keep a roof over the heads of ordinary householders who borrowed under extraordinary circumstances created by the greed of banks and to ensure people who enter those arrangements are left with a reasonable standard of living that will allow them to re-engage with, and contribute to, society and not be smothered in debt for years or decades.

Patrick O'Donovan (Limerick, Fine Gael)
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I propose to share time with Deputies Joe O'Reilly, Dara Murphy and Tom Barry. I welcome the opportunity to speak on Second Stage. The importance of Second Stage is that it provides people with the opportunity to make general comments. I agree with only one point made by the previous speaker, that this is undoubtedly a complex area of law. The people who are to be beneficiaries of this do not need simplistic, will-o'-the-wisp solutions thrown around like snuff at a wake. Will-o'-the-wisp solutions brought this country into the hames it is in now. To pretend there is a simplistic, abracadabra solution to personal insolvency does no justice to those who will hopefully be the main beneficiaries of the measure.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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They did it in Norway.

Patrick O'Donovan (Limerick, Fine Gael)
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No one interrupted Deputy Boyd Barrett. If it was easy to introduce it in a certain jurisdiction, it is a pity the previous speaker did not use the experience of that jurisdiction to introduce a Private Members' Bill. There has been no attempt by anyone in opposition to introduce any proposal on personal insolvency. On that basis, I congratulate the Minister for Justice and Equality. Since Deputy Shatter became a Member of the Oireachtas, it has become clear that his knowledge of the protection of the family is second to none. Those studying to become solicitors know that Deputy Shatter's Family Law is one of the foremost authoritative texts on Irish family law. Who better to have in a position of protecting the family home than someone who is the foremost authority on family law? It is important that this restores some semblance of hope to those who have had their hopes shattered by the main institutions of the State in terms of banking, regulation, administration and governance. People have been failed on all fronts. Previous speakers have gone into detail on what is included in the Bill. Families come into my clinic, and to other Deputies' clinics, and they do not have the wherewithal to get from Monday to Friday. They are at their wits' end and their hopes have been dashed. They have been left with huge debts and an inability to pay back debt. Banks and everyone else are breathing down their necks. The measure before the House and the measures introduced by the Minister of State, Deputy Jan O'Sullivan, with regard to mortgage to rent schemes, show the commitment to dealing with personal debt and the protection of the family home in the programme for Government. This commitment must be recognised by Members on all sides. The Government's commitment to this is evident in the fact that there is no guillotine on the Bill, which will be debated late tonight, and that Committee Stage will be taken when we resume.

I have concerns that the service should be rooted in the community and should not be aloof. I compliment Deputy Maureen O'Sullivan because there is a temptation to focus on acronyms, such as PIPS and PSAs. The people who will ultimately have the debt hanging around their necks do not care what acronyms are used. They want to know who the person is and whether they can trust them. They want to know whether the person they will go to for advice and assistance is tainted by the process that got us into this mess. As a State, we will never be able to move on from the past 14 years until we see some semblance of justice for the hundreds of thousands of families left in dire straits. This may involve bankers, other people or those who held political office and who failed the State being brought before the courts to be held to account. Until we get to that point, legislation such as this will only take us part of the way. We need the cleansing process to ensure we do not go down the same failed road as we came out of.

MABS is a trusted organisation and has its roots in every part of the community. It is accessible to people and speaks the language understood by ordinary people in difficulty. It is proven to be confidential and trustworthy in its dealings with people. It has a role at the lower end of debt but when this Bill is being fleshed out on Committee Stage, the organisation may have a greater role to play.

I welcome the Bill. There is a temptation in this House, particularly in the past few minutes, towards opposition for opposition's sake. If this was as simple as some people suggest, it would have been resolved long ago. The fact that it is so complex and involves so many Departments means that compliments are due to the Minister. I wish him well in its implementation.

Joe O'Reilly (Cavan-Monaghan, Fine Gael)
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I thank Deputy Dara Murphy for facilitating me. I congratulate the Minister, Deputy Shatter, on his pioneering, comprehensive and realistic legislation. He has a major record as a legislator and this Bill adds to it. In congratulating him, I also congratulate the Government on this important legislation.

Listening to Deputy Boyd Barrett brings one into a fantasy world and makes one think that life is so easy, that money grows on trees and that there are simple solutions. On Committee Stage, I would like Deputy Boyd Barrett to tell us where he sees the additional taxation to accrue the moneys necessary to provide debt forgiveness. Where will he source the money, who will pay it and how will he administer the taxes? Does he foresee this money as additional to the €10 billion of tax he cited as desirable in next year's budget during the referendum campaign? If it is not additional, where will the €10 billion of additional taxes be placed, on whom and by what process?

Brian Hayes (Dublin South West, Fine Gael)
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That is correct.

Joe O'Reilly (Cavan-Monaghan, Fine Gael)
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It is about time he started to answer such questions. This legislation is vital to overall macroeconomic recovery in this country because it is necessary to get stability and normal spending going. Until people give a realistic proportion of their income back as repayment on overborrowing, there will not be spending, confidence and disposable income in the economy. It is a crucial part of the overall Government strategy to bring back the economy. Getting this matter resolved in the coming months will be central to that achievement.

The major advantage of the legislation is not so much its specific provisions, although I will attempt to deal with them in the time available to me, but the fact that it will create conditions where creditors and debtors will be facilitated to enter into realistic discussions. The incentive for creditors is that they will have a resolution option which avoids bankruptcy on the part of the debtor, for the new shortened period of three years, out of which they are unlikely to gain anything. The advantage to debtors is that they will have access to a process whereby agreement can be reached on their using a realistic portion of their income to discharge their debts while retaining sufficient to sustain a reasonable standard of living. Deputy Boyd Barrett is correct in pointing out that the banks were rescued by taxpayers and remain heavily subsidised by them. As such, there is an onus on the banks to forge imaginative solutions that will accommodate the large numbers of people in difficulty. They must bring forward a range of products that will allow customers to reorganise their finances and recover their financial standing. In fact, the financial institutions have several obligations. They must work to restore their own well-being, as well as fulfilling their moral responsibility to their debtors and to the taxpayers who are subsidising them. To do so, they must bring forward products that are realistic, accessible and useful. The importance of this legislation is in its efforts to facilitate them in so doing.

The Bill sets out three types of debt restructuring agreements that will be available to people according to their needs. The purpose of the debt relief notice arrangement is well charted in the Bill and will be realistically targeted. We have had some nonsense talk in this Chamber to the effect that it should be made available to any person with debts above a certain threshold. While consideration should be given to restructuring debts, where people have sufficient income to meet their financial obligations, they should and will remain obliged to do so. These provisions should only be available to those who genuinely cannot pay. The debt settlement arrangement for unsecured debt and the insolvency arrangement offer a degree of flexibility over time to persons struggling with serious debt. I urge the Minister to include financial advisers as well as accountants and solicitors in these provisions. Once their bona fides are established, people with expertise and a track record in dealing with such matters should be deemed fit to act as intermediaries in the process.

The success of this Bill will not be so much in its implementation as in the fact that it will create the conditions where all parties will take a more sensible and realistic approach in dealing with unsustainable debt. Anything which reduces the likelihood of such matters ending up in the courts will surely be welcomed by all. I reiterate my plea to the financial institutions to respond to the legislation with imaginative products. Taking a realistic approach whereby people are required to pay a reasonable and sustainable portion of their income is in the creditor's interest. If the banks engage in the process in a reasonable way, it will have knock-on benefits for the whole economy. Such an approach makes sense in macroeconomic terms, in terms of restoring individuals' personal circumstances and in terms of restoring banks to profitability. The speedier the process and the more realistic the terms of individual agreements, the more likely it is that they will work. There is no advantage to creditors or debtors in having unsustainable arrangements that are likely to collapse after a few months.

There is no avoiding the inevitability that some people will seek immorally to deny and renege on their debts. No quarter must be given such people, who make up a very small minority of all those in difficulty. The vast bulk of people are earnestly seeking to address their situation.

Dara Murphy (Cork North Central, Fine Gael)
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I welcome this important legislation and commend the Minister, Deputy Alan Shatter, on his impressive work rate in bringing it forward. Some days ago in this Chamber, Deputy Micheál Martin sneered at the Taoiseach's suggestion that he and his Ministers are seeking to clean up the mess created by Fianna Fáil in government. This Bill is another chapter in our efforts, since coming into government some 18 months ago, to undo the damage done by the previous Administration. The latter failed completely to address the situation whereby people seeking to enter bankruptcy or being forced into bankruptcy faced an extremely punitive discharge period of 12 years. Moreover, the vast majority of those now facing severe financial difficulty are in that position because the last Government utterly failed them. I note there is no representative of the main Opposition parties in the Chamber at this time.

The previous speaker suggested there could or should be some type of panacea for the difficulties confronting people as a consequence of unsustainable debt. There was never any suggestion from Government that this legislation would solve everybody's problems or even provide a complete solution for any individual. What it will do is provide a starting process whereby people can begin to normalise their relationships with the institutions and businesses to which they owe money. In recent years we have seen a significant departure in terms of how banks deal with people who fall into difficulties. Several bank managers have pointed out to me that negotiating power has been removed from local banks. This was done because an unfair degree of blame was assigned locally for the excessive lending that took place. We still have a very strong network of local staff and managers. The banks should be encouraged to incentivise local managers to sell pensions and insurance policies, for example. These people have a history and relationship with their customers which should allow them to negotiate in a productive manner. Staff in branches throughout the country are willing to examine matters in a fair and educated way. One of the main aspirations of the Bill is to differentiate between those who cannot pay and those who will not pay. That knowledge already exists within the bank network.

In regard to debt relief notices, Deputy Richard Boyd Barrett very much misrepresented the situation in his references to an income of €60. Many people in the country, even those who are working and couples that have two salaries coming in, could easily arrive at a situation where they are left with a disposable income of €60 after paying for utilities and other commitments. It is not as restrictive as it would appear. I am sure colleagues would agree that a significant number of those who go to public representatives in serious distress have loans of less than €20,000. A loan is not onerous by virtue of its amount; it is onerous by virtue of whether the person concerned can afford to repay it. The new arrangements will offer relief to a significant number of those in debt. I appeal to the banks to engage proactively in the process. We all have a job to do in encouraging people to participate in the debt relief procedure.

Tom Barry (Cork East, Fine Gael)
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I welcome the Bill. The issues of debt and bankruptcy have been examined for many years. The current bankruptcy period of 12 years is a lifetime and much too long. Unfortunately, it has taken the current hard times to have the matter addressed. The proposed bankruptcy period of three years makes much more sense than the current position. I welcome the proposal to have debt relief provided on the basis of knowledge rather than any form of favouritism.

I will focus on debt relief notices as they will affect more people than the debt settlement arrangements. The debt relief notices will be available to those with unsecured debt of less than €20,000 and will be provided in cases where people have a disposable income of €60 per month. All incomings and outgoings of a household will be assessed to arrive at their disposable income. The legislation provides that those who avail of a debt relief notice must be left with a reasonable standard of living. This is an important provision because it gets to the nub of the issue, namely, that many of the people we consider to be financially secure wake up every morning tormented by financial worries and a belief that they may not get through the following week or month. This is an extremely dangerous situation.

A debtor who wishes to avail of a debt relief notice must submit a written application, including a written declaration of all incomings and outgoings, to an approved intermediary who will go through the applicant's affairs in detail. The comprehensive and fair assessment process set out in the legislation will lead to the drawing up of a prescribed financial statement providing for a resolution for persons who do not have any prospect of clearing their debts within five years. This process allows people to see light at the end of the tunnel. This is the key element of the Bill because many individuals and families do not have hope and without hope, a solution is not possible. The co-operation of everyone involved is required for this process to succeed. I note the Bill provides for co-operation between the Revenue Commissioners and all Departments. This will ensure no one can cite a lack of co-operation among public service bodies as a reason for the process not being completed properly.

The debt relief notice process takes into account future changes in a person's circumstances. For example, if a person receives a gift of more than €500 or his or her income increases by more than €250 per month, half of the additional sum will be allocated to the insolvency service. If an individual who avails of a debt relief notice wishes to take out an additional loan, he or she must notify all relevant parties that he or she is in this process. There is no point foisting high cost options on people who can barely afford to put food on the table, and this process provides a low cost option for debt relief.

The debt settlement arrangements will apply to those with unsecured debt of more than €20,000. Under these arrangements, the debt will also be relieved within a five year timeframe. I commend the Minister on his approach to this issue because his Bill goes to the heart of the debt problem. Banks will be required to take a much more prudent approach to lending and to be cognisant of the legislation. They will not be able to railroad people. Instead, they will be required to deal with debtors properly with a view to rectifying the mistakes made by the debtor and bank. There are always two sides involved where debts arise. If the banks refuse to deal with people properly, the debtor may avail of the debt settlement option. This is a sensible means of getting everyone to work together.

I thank the Minister for giving this matter much time and consideration. People should read the Bill because in the years ahead people will recognise that it provided a basis for a comprehensive solution to the many problems people now face.

Luke Flanagan (Roscommon-South Leitrim, Independent)
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I understand this Bill forms part of the State's commitments under its agreement with the European Union and International Monetary Fund under which to Government agreed to "introduce legislation to reform the personal debt regime to the Oireachtas before the start of the summer recess, with the objective of increasing the speed and efficiency of proceedings while at the same time mitigating moral hazard and maintaining credit discipline". The Bill does not quite achieve this objective as it falls down in a number of areas. None the less, it is an attempt to tackle the issue of personal debt and, with the appropriate amendments, I am sure we will be able to meet the required objectives.

One in seven mortgage accounts in the Republic of Ireland either has been in arrears for more than 90 days or has been restructured with less than the contracted monthly mortgage payment being made. The country clearly has a debt problem. Last week, I watched a panel discuss rent allowance on the "Tonight with Vincent Browne" programme. The discussion crystalised for me what type of serious debt problems we have. It has been suggested that moving everyone out of landlords' properties and into empty houses would solve the problem of rent allowance. Given that 93,000 people are in receipt of rent allowance, even if the average mortgage on the 93,000 properties held by landlords who rent to rent supplement recipients were only €100,000, moving everyone out of these properties would leave a €9.3 billion hole in the banking system. It is obvious that something needs to be done soon about debts that people cannot afford to repay.

Under our current draconian bankruptcy rules, which involve a bankruptcy period of between five and 12 years, approximately 30 people are declared bankrupt every year. By comparison, 60,000 people are declared bankrupt every year in the United Kingdom, which has a population of 62 million. When one considers that the population of the Republic is 4.6 million, one finds that the UK bankruptcy rate is more than 500 times higher than that of Ireland. Immediate change is needed.

Virtually all the Deputies who spoke referred to people in serious financial difficulty visiting their clinics. We have also heard about the high number of suicides, many of which are connected with financial problems. Like many other Deputies, I grew up in a house where money was short. This places people under severe pressure and they do not have the energy to develop, enjoy their lives or do good in the community. People who are worried about whether they will lose their house or do not know if they will be able to put food on the table find it difficult to go on.

In 2009, the Law Reform Commission published an extensive study into comparative approaches to personal debt. In its 2009 consultation paper, Personal Debt Management and Debt Enforcement, and its final report in 2010, the LRC made a series of recommendations for legislative reform. A key conclusion of the consultation paper was that Irish personal insolvency law was outdated and ineffective, particularly when compared with other European countries. The paper states:

Irish law, unlike the vast majority of its European peers, does not therefore provide access to an adequate and effective personal insolvency system, as required by the Council of Europe's Recommendation on legal solutions to debt problems. The Commission therefore takes the view that a new personal insolvency regime must be urgently introduced in Ireland.

The report of the interdepartmental working group on mortgage arrears, the Keane report, which was published in October 2011, also recommends reform of personal insolvency legislation.

FLAC, the Free Legal Advice centres, has broadly welcomed the Bill. The organisation's director general, Ms Noeline Blackwell, stated: "While the Bill is only for those who are unable to pay their debts in full, it will also help people who need a bargaining chip with their creditors." However, she also expressed concerns about the imbalance of power between banks and debtors and noted that the Bill preserves the creditors' veto in respect of the debt settlement arrangement and personal insolvency arrangement options. The reason for FLAC's concern is clear when one considers that banks and debtors have a veto over the arrangements provided for in the Bill.

They literally have a veto over forgiveness. The very people who got us into this mess in the first place are the same people who will decide whether a person will be let off.

A previous speaker said the banks are also to blame. The reality is the banks are far more culpable than the individuals who took out the loans. People had to take out such big loans because of the lending policies of these banks. In a town like Castlerea, where I am from, no one wanted to pay €200,000 for their house. They had to pay so much because they were competing against developers who got tax incentives. As a result, prices went up. The fact there seemed to be unlimited credit from the banks and the fact they did not know when to stop giving the credit caused the problem, especially in a country where the majority of the people never had two pennies to rub together in the first place. When the banks throw money around, the temptation is to take it, particularly when there is no choice. Now the whole edifice has collapsed, the banks must take responsibility. The fact that 65% of creditors must give the thumbs up before anything is done is hardly fair and does not make sense.

One of the prime reasons for so much money flooding into the economy was the ridiculous arrangement put in place when the euro became our currency. We ended up with the same interest rates as Germany, regardless of the suitability of the arrangement. It certainly made no sense over the last decade. When we needed something to dampen down the economy, we had to put up with interest rates that were used to drive forward the German economy. To say that the people who took out the loans are partly to blame might be true to an extent but they only carry a very small proportion of that blame.

Earlier a Deputy asked where we would get the money from to help these people. I was under the impression the banks were stress tested and in that stress testing, they were supposed to take these debts into account. With one in seven unable to keep up their mortgage payments, it was obvious this was coming down the line. The banks were recapitalised to the tune of €9 billion to deal with this but apparently it is now unrealistic to address the problem that way.

I found two interesting points in opposition to this legislation on the namawinelake blog:

[T]he person seeking bankruptcy must be able to demonstrate that they will not be able to pay their debts over a five-year period. According to the Bill "it is his or her opinion there is no likelihood of the debtor becoming solvent within the period of 5 years commencing on the date of the making of the declaration". So if you are a mortgage-borrower with six months of arrears today and a property which has declined 50% from peak, on what basis can you demonstrate that you will not be able to become solvent in five years? Obviously, it will depend on the future direction of house prices and there is no guidance given in the legislation as to how future asset prices might be determined.

Anyone who can tell the price of a property today is some genius, given property that cannot be sold cannot be priced. How a person will know the value in five years time is beyond me so how is it practical to use that measure? The blog continues:

[T]he person seeking bankruptcy must be able to demonstrate that they have co-operated with their mortgage lender for a period of at least six months and that they have not agreed to any alternative arrangement. The Bill says "the debtor has made a statutory declaration declaring that he or she has co-operated for a period of at least 6 months with his or her creditors who are secured creditors as respects the debtor's principal private residence in accordance with any process relating to mortgage arrears operated by the secured creditors concerned which has been approved or required by the Central Bank of Ireland and which process relates to the secured debt concerned and that notwithstanding such co-operation the debtor has not been able to agree an alternative repayment arrangement with the secured creditor concerned, or that the secured creditor has confirmed to the debtor in writing its unwillingness to enter into an alternative repayment arrangement".

In other words, notwithstanding the fact that you are hopelessly insolvent with massive negative equity, your bank can seemingly stop your bankruptcy bid by providing you with temporary relief on your monthly mortgage commitments.

I am no expert but I can read and what I have read about this points up serious flaws. The banks have the last say, the very organisations that recklessly lent money to people and encouraged them to take more by releasing equity. Now we are all in a heap and people are killing themselves over their debts, what happens? The banks are given the whip hand once more. They are the king and always will be the king in this country as long as we have right wing governments.

Kevin Humphreys (Dublin South East, Labour)
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I strongly agree with Deputy Flanagan that over recent years we saw reckless lending by the banking sector and it has not yet taken responsibility. It arose in the Joint Committee on Finance, Public Expenditure and Reform this afternoon when the CEO of Permanent TSB said there would not be any witch hunt. There seems to be a witch hunt of those in debt instead of those senior executives who recklessly lent money.

I welcome this broad and comprehensive legislation and thank the Minister for the diligent work he has done on this, along with the Oireachtas Committee on Justice, Defence and Equality for its painstaking work and the staff who worked very hard in recent months to get this Bill before the House so quickly. This is a radical reform of our bankruptcy laws and is one part of the many solutions on which this Government is working to deal with the problems of unsustainable mortgage and personal debt that affect households and act as a drag on the domestic economy. Like Deputy Flanagan, we have seen people with mortgages or business loans struggling with unsustainable debt. The proposals in this legislation will help people to start working on a way forward. It is a major step towards fixing the problems this country faces. This Government has delivered across a broad range of measures: renegotiating the bank debt, yesterday's stimulus package and investment in key infrastructure, the action plan for jobs, the credit guarantee scheme and anti-corruption legislation the Minister will introduce. There is, however, more to be done. We urgently need an overhaul of the HSE and the constitutional convention in the autumn will start to build confidence in the economy, society and public services.

The priority of the Labour Party is to keep families in their homes. We are starting to deliver on this commitment. It must be remembered, however, that the provisions in this Bill have consequences for the people concerned and they must not enter into them lightly. I urge anyone looking at this to take serious advice.

I am concerned that a five year review period is far too long. I ask the Minister to consider seriously a review of the entire package within two years to ensure it is working as intended and that people are seeing benefits. The Minister has changed the personal insolvency agreement from ten years to five but if the debt relief notice, the debt settlement arrangements and the personal insolvency arrangements are not working after two years, they will not work at all. I ask the Minister to look at this much more quickly than five years and to revisit it within the first two years.

The money advice and budgeting service, MABS, has done excellent work in the debt relief notice area for many years. It has ploughed a lonely furrow with FLAC, helping people with unsustainable debt. The limit of €20,000 is too low; it should be increased to at least €30,000 if not €50,000. FLAC has published some excellent proposals on other specific issues related to debt relief notices and I ask the Minister to consider them carefully. It makes no sense to push the many people who are dealing with the MABS and have debts greater than €20,000 into seeking debt settlement agreements under which they have to engage a personal insolvency practitioner. The MABS has a good deal of experience in the management of small but unsustainable debt and has in place a national infrastructure and good governance procedure. People trust it and it has a long record in communities. We do not need to redesign the wheel in this case. The MABS has a strong role to play and I call on the Minister to consider expanding the areas in which it can work. Perhaps this might be considered on Committee Stage. I call on the Minister to examine how the personal insolvency practitioners, PIPs, are regulated and how their fees are set. This issue should be examined on Committee Stage also. This is an excellent piece of work which is long overdue. I look forward to this package of laws passing through the House.

Arthur Spring (Kerry North-West Limerick, Labour)
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We should consider how this legislation will play out overall and the consequences of negligent lending. Three Deputies have just emerged from the Joint Committee on Finance, Public Expenditure and Reform. If we learned anything today it was that banks were finally starting to acknowledge that the form of lending pursued over a long period, especially mortgages, was negligent and that negligence must have consequences. We have also learned that the ESM will come to the rescue of the country at some level. The way this plays out will be down to the ability of Ministers, the Government and the ECB to listen to how we want them to solve the banking crisis.

The cost of funds to the banks remains too high. If we can change this in such a manner that the ESM can shore up the cost of funds and bring it down low enough, variable rate loans and tracker mortgages will not cost the taxpayer money in the future.

Before anyone tries to find out how he or she can avail of the Personal Insolvency Bill, I encourage him or her to watch and see how it plays out in the banks, whether any of the mortgage debt will be parked, whether there will be further reductions in variable rates and how the Government will pursue the Bill with a view to keeping people in their homes. The last thing I want to see in the case of personal insolvency brokers or trustees is for expenses to be incurred by a person who is technically bankrupt for the purposes of negotiating with banks or people whom he or she does not trust.

My friend and colleague, Deputy Kevin Humphreys, has rightly pointed out that the MABS has played a great role in many towns and I have expressed this view to the Minister. Much depends on the capacity of the MABS to negotiate with the banks, solicitors and creditors. There may be a deficiency in some places when it comes to dealing with the legalities, but in such cases expertise can be hired in the private market and this could bump up the expertise of the MABS. I would prefer to see the MABS dealing with the issue of insolvency and creditors and the proposed limit raised from €20,000. I worked in several financial institutions. Many of my constituents know this and have come to me seeking financial advice and for me to negotiate on their behalf. I welcome the development of the Personal Insolvency Bill, but I cannot underestimate what the MABS has done for people to date.

If the sole purpose of personal insolvency trustees is to try to provide a job for themselves, I remain fearful. I fear this will cost the State money and that there will be an unacceptable lack of transparency for taxpayers and the general citizen. The comparability of a personal insolvency trustee is unbeknownst and will be determined behind closed doors. People will be resting on their laurels in the belief others will negotiate on their behalf. They will not get the same deal as the person next to them. Of the people who have approached me with financial troubles, no two have the same problem. I am keen to see the details of the Bill established as soon as possible, especially the costs of the PIPs, who will pay for them and what the terms of engagement will be. There must be arm's length engagement. I have no wish to see the first cousin of someone else dealing with someone in a bank in a small town, as that could lead to problems further down the line.

The credit unions must be protected. They have many loans under the amount proposed and we should not encourage people to seek the assistance of the Bill for the purposes of damaging the credit unions. It is encouraging, if somewhat ironic, that Moody's believes this will affect the banks. Standard & Poor's also believes this legislation raises concerns for the banks also. Still, the banks have been capitalised and I hope this legislation will be to the benefit of the people.

As I know we are breaking up shortly, I wish everyone a nice recess. I hope I will not bump into anyone here for at least one month.

Brendan Griffin (Kerry South, Fine Gael)
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I will be canvassing in Tralee shortly.

Arthur Spring (Kerry North-West Limerick, Labour)
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Will the Deputy be handing out my leaflets?

Michael Kitt (Galway East, Fianna Fail)
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You are all welcome to Galway, by the way.

Peter Mathews (Dublin South, Fine Gael)
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I thank the Minister for Justice and Equality for bringing forward this legislation. I realise it is at the request of the troika because it is part of the recovery programme. Ireland, which I love, became insolvent. For the past four years it has struggled on a life-support machine. Deputy Arthur Spring stated the banks were the engine, but they were also the main contributors, owing to lax or there being no supervision, and the conduits of the financial tsunami that caused great destruction. They have been brought through the life-support process into something of a zombie existence, but their customers remain under the cosh. Today one of the banking institutions, not one of the two large banks but Permanent TSB, came to explain its position and how it was trying to create a live bank from the carcass. Recently the Minister for Finance suggested he did not know what to believe when it came to being briefed by and getting reports from the banks. That is the truth of the matter. Despite this, the legislation expects that the customers of banks will do everything under the three alternatives in terms of a full confession, written and oral, of the full extent of their assets and liabilities. Regardless of this, even today, we do not know the position of the banks. Am I not right? We have asked about their income, provisions and categorisation of their assets, but it is still fuzzy. This is not on.

I thank those involved in the MABS because they have been on the battlefield, mostly at the lower levels of debt. Every week at least five constituents come to me with detailed stories of their positions. The financial slavery ahead of them is abhorrent and appalling. It is wrong that they cannot engage with lenders. We hear the phrase "the banks will engage", but the are not doing so. They are directing their customers and pushing them around like slaves on tea trolleys, which is wrong. We need to consider the fundamental road to well-being and the recovery of the country at every level. This applies not only at the lower or middle levels of income but also at the top. This society from top to bottom is having a financial nervous breakdown. We are on the right road and pointed in the right direction with the Personal Insolvency Bill. I congratulate those responsible in the Department where there is so much happening. The staff should be thanked for their long hours of work and diligence. At the same time, there is no point in facing in the right direction if one can never reach the destination. That is my concern. We must look at this Bill, and not be afraid to shorten the timescale of bankruptcy in the larger cases and to be rigorous about those who carry out the negotiation and the intermediation between lenders and borrowers. I would also make it much more imperative that the main creditors, especially secured creditors, are brought to heel in this because they acknowledged today that the ten years leading up to the collapse were of their own architecture and execution. It is all wrong to think that the borrowers and counter parties of that situation should be enslaved for the next number of years and we must do something about it.

Jerry Buttimer (Cork South Central, Fine Gael)
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I commend the Minister and his staff on their enduring work in the arduous process of getting to this point.

I am reassured that Deputy Mathews is doing constituency work. I, too, every week meet people coming into our offices. These are genuine ordinary persons who did not make a fortune, who did not go berserk but who now are in trouble. They are living in fear.

Deputy Mathews used the word "slavery". There is a new modern form of slavery in society which is called personal debt. That is having a profound effect on the quality of life of ordinary citizens. It has a significant impact on the social and economic life and the mental health of the nation.

I hope this Bill is the beginning of the journey to reclaiming the country and allowing people to be able to live without fear. There are so many today who are afraid to go home because they are unemployed, they have debt or they are bankrupt. They are afraid to talk to their wives. That is the impact on the quality of life.

Deputy Mathews is correct. I pointed out in the House previously that the banks are telling us lies. They are codding us up to our eyeballs. They come out with these great advertisements on television and radio, they bring us into briefings and they meet us to tell us all they are doing and all the money they are giving out, but they are making it impossible to work with people. The banks must recognise that we require people to spend money to do up their houses and to buy houses and small and medium-sized enterprises to be able to employ and act as a stimulus in local economies. Unless we wake up to the reality in this country, we are heading towards a continuation of the spiral of insolvency and debt.

I very much welcome the debate on this Bill. In many ways, it is the statue to 14 years of the boom and bloom of which former Taoiseach, Mr. Bertie Ahern, et al told us. This is the legacy they leave. This is their monument to where we were under their false voodoo economic carry-on. That is why it is important that we move forward with this piece of legislation and others in a suite of measures that will assist citizens.

We need resolution strategies. We need, with the Central Bank and the other banks, to ensure there is a strategy to assist those who are in mortgage arrears. It is imperative; it is critical. Equally, we must recognise that this will take time. This cannot be done in the space of a five hour debate or in the passing of the Bill.

The Personal Insolvency Bill will, I hope, act as a catalyst to the banks to work with individual borrowers in resolving mortgage arrears cases. The protection of the family home is the person's priority.

Michael Kitt (Galway East, Fianna Fail)
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Deputy Buttimer has one minute remaining.

Jerry Buttimer (Cork South Central, Fine Gael)
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I must speak about MABS as Deputy Spring has done. MABS has built up a considerable database of contacts and of approaches which must be utilised in the future.

There is an expectation that the Bill is the panacea, roadmap or answer to all ills. People have felt a sense of hopelessness and of being let down and forgotten. There is now an insolvency Bill building upon other measures that can offer a way forward. Given that we are in a challenging economic environment and given that there is a Government that has gone to Europe, made the change and created a different approach in the domestic economy, we continue to commit to the protection of people. One size does not fit all. We must recognise we need entrepreneurs but we also need public services and must protect people. I hope the Bill will be the catalyst to do that.

Mick Wallace (Wexford, Independent)
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This is a massive body of work. It is complex and it is hard to know where to start.

It will be significant. If it works out well for the people and the State, no doubt it will be a considerable boost for Ireland. A few years ago we could not have imagined that the problem with debt in the country could be so bad. There probably has not been anything like it in the history of the State. Central Bank Governor, Patrick Honohan stated: "Not all economic crises have left as substantial a legacy of personal debt as has the current global crisis." It is difficult how one gets around to dealing with it. I would not for one minute say that it is easy to solve or that it is easy for the Government to come up with all the right answers.

As always in debates like this, there will be much repetition and, obviously, I will make points others have made too. People have asked me, because of my business over the years, whether it is a good time to buy an apartment or a house. I have always been of the view that we probably will not hit the bottom of the market until we deal with the significant problem of negative equity and the considerable personal debt problem that is so prevalent.

Starting with the debt relief notices, I note that MABS, which definitely has its finger on the pulse and knows what is going on in this country, states that it would only facilitate a maximum of 15% of its present clients. Seemingly, MABS deals with 30,000 cases a year. It seems that the majority of those looking at it are of the view that it would be a positive move to increase the threshold to €30,000 from €20,000.

The debt settlement arrangements and the personal insolvency arrangements are a significant improvement on what there was because what there was has really not been of any service. This is a step in the right direction. I would be wary that it looks a little bureaucratic and if it is too bureaucratic, people will take the easier option. People often have the option of throwing their hands in the air and walking away. This is happening at present and we will see more of it. I am firmly of the belief that if we can regulate negative equity and impossible personal debt, it will be better than allowing a disorderly situation to prevail. How the debt settlement and personal insolvency arrangements will work out may prove less bureaucratic than I fear, and I hope that will be the case. It will be good if the maximum number avail of this arrangement rather than just throwing in the keys or throwing their hands in the air in despair.

Like most Members, I am worried about the veto given to the banking system. I have looked at what the Europeans have done in this regard and I do not see any other country where the lender has quite as much power as we are giving to our banking institutions. I have had too much experience of dealing with banks in the past five years to even start talking about it here. However, I am not the only one who is afraid they might not behave in as ethical and fair a manner as we might like. To be fair, I would not say every bank or every bank branch behaves poorly because they do not all behave the same. I have been treated fairly by some banks and I feel I have been treated unfairly by others. However, I would prefer if they did not have this veto over the debt settlement and personal insolvency arrangements.

The reduction of the bankruptcy term from 12 years to three years is a positive development, although Members might say "He would think that, wouldn't he?", given that I might be declared bankrupt one of these days. The term is one year in America and Britain and some have advocated that the same would apply here also. I do not agree and I believe the Government has got it right with the three-year term. The creditor needs to be protected too. If I had €10,000 in my pocket and someone wanted a loan of that, I would like to get that money back, so there must be protection for the creditor. The period of three years is about right and to set it at one year would have been to go too far.

The change in the term of bankruptcy from 12 years to three will also be a boost to entrepreneurship, which is very important if we want to create employment. People have to be able to take risks. Of course, they get shot when the risk does not work out very well, but it is very difficult for people to create employment in this country without taking some risks. It is great when it works out, and it does work out much of the time, although not always. If a banking crisis arrives and cuts the value of sites tenfold and the value of property by at least 50%, it can be challenging.

On a personal level, I have had people from the Socialist Party and the People Before Profit Alliance lecturing me on business of late, telling me how I should be doing it and what I should have done or should not have done. It is difficult to take lectures from people who never employed anyone in their lives. Many of them never did a day's manual work. It has been a bit nauseating. I am too well aware of how challenging it is in business, although I am not going to start looking for sympathy. In any case, the period of three years is about right for bankruptcy and the change is a positive move for the State.

Speaking of bankruptcy, a very interesting statistic is that the average millionaire in America today has gone broke three times but, of the millionaires who have gone broke in a recession, only one in ten has ever gone broke again. Recessions are very educational, and people in business learn a lot from them.

Having read up on this issue before the Bill was published, I thought there might have been some change to the regulation of debt collection. I have had some negative experiences with sheriffs coming to look for their piece of meat. The present arrangement is not very good. For some strange reason, those we have encountered seem to be of a bullying nature, very aggressive and not afraid to kick the door in. They do not seem to behave in a very regulated fashion. Their biggest priority is getting their €470 call-out fee, and the person does not even get a receipt for that. The sheriff is prepared to negotiate on everything else, however, and it is a matter of trying to stop him from taking the equipment. A friend of mine was cutting a fellow's hair while the sheriff was looking for the seat he was sitting in, and he threatened to bring it out the door, only it would not fit. It is not right. I know of cases in which they have gone into farms in the middle of the night and taken stuff-----

Paul Kehoe (Wexford, Fine Gael)
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I hope it was not Deputy Wallace's hair they took.

Mick Wallace (Wexford, Independent)
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It was not. People should not be allowed to enter a farmer's property in the middle of the night and take machinery or anything else. That should not happen in a civilised society. Some serious thought should be put into the regulation of debt because things can be done in a much better fashion.

While I will not get to address all of the issues, I would like to draw attention to the case of Norway, which I found very interesting. Norway faced a debt crisis among private households in the early 1990s, mainly caused by rising unemployment and a fall in housing prices. Norway was and is a land of homeowners, with more than 80% of dwellings owner-occupied. In the most exposed areas, houses and apartments lost 50% to 80% of their value. This happened very quickly, particularly in the larger cities. At the beginning of the 1990s, it was roughly estimated that up to 100,000 households were having problems fulfilling their obligations and many of them feared losing their homes. Selling was not a way out because the prices that were attainable were far below the money lent to buy the houses and, of course, there were very few buyers. Many individuals and families lost their life savings almost overnight and many found themselves severely indebted as well. All of this arose from the fact that, in the late 1970s, the Norwegian Government had strict regulations on credit interest rates but the creditor regulations became less effective due to the availability of credit from foreign sources and the growing so-called grey market. In 1994, the Norwegian Government deregulated the credit markets, which caused a significant increase in bank lending. There were certain restrictions on financing but credit was requested by more and more consumers. The Norwegian Government also eased the regulations on owners of co-operative dwellings, the price of which increased along with the co-operative owners' buying power. This also led to a higher demand for owner-occupied dwellings. The Norwegian Government then lowered capital reserve requirements and decreased bank supervision. This was the beginning of the Norwegian house price bubble. It sounds so familiar due to the similarity to our own situation, and it is a pity we did not find out about it earlier. I should have studied the history of banking and the history of money, which goes back over 500 years and which I have been reading about over the past three years. I am sorry I did not understand it better before then. In Norway, if a house was bought for, say, €300,000, they valued it at current prices and if that was €150,000, they decided on a figure of €150,000 plus 10%, which is another €15,000, making a total of €165,000. For the next five years the person would have to pay the interest on it at whatever the rate at the time. If the person did not break his or her commitment to pay the interest on a monthly basis for the five years, that €165,000 minus what the person had paid in interest over that five years, became their new mortgage.

Peter Mathews (Dublin South, Fine Gael)
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Hear, hear.

Mick Wallace (Wexford, Independent)
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It was a great system.

Before we get out of the hole we are in we will have to engage in some form of debt write-down. I know it is difficult. The main argument put forward on many occasions is the moral hazard argument but as many others have stated, far be it for the banks to talk about moral hazard given the way they have behaved.

In general, if the structure the Minister is putting in place could be a little more flexible and more attractive for people it will be a positive move and will produce greater results. This is a huge item of work, and I acknowledge it is far from easy for the Minister. The Bill is a start. Obviously, the bank veto is very worrying but at least it is a start and I hope we can improve on it in time.

Paul Kehoe (Wexford, Fine Gael)
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I wish to share time with Deputies Joe Carey, Brendan Griffin and Michelle Mulherin.

Joanna Tuffy (Dublin Mid West, Labour)
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Is that agreed? Agreed.

Paul Kehoe (Wexford, Fine Gael)
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I welcome the Minister to the House. The Minister, who is responsible for the Bill, has spent a good deal of time listening to speakers and to reviews of the Personal Insolvency Bill.

I welcome the introduction of the Bill. It will be remembered for many years as major reforming legislation introduced by this Government. I thank the Minister and his staff, specifically the people in the Attorney General's office and the Parliamentary Counsel who have done a huge amount of work on the Bill in a short period. They worked under extreme pressure to get the Bill published before the summer, and it is welcome that it will be in the committee over the summer recess.

This is welcome legislation. The Bill directly addresses problems faced by people living across Ireland who went through the period of boom to bust. I have no doubt it will affect a huge number of people ranging from those who engaged in very low levels of borrowing to those who engaged in very high levels of borrowing. As public representatives every Member of this House will know people with personal debt, mortgage debt, business debt, personal loans and credit card loans. It affects thousands of people across the country who are in any sort of arrears.

On a daily basis people come into my office who are struggling to pay their mortgages or personal debts. People want to pay their mortgage, and they will almost go hungry to pay their mortgage. There are then those who can afford to pay their mortgage but will not pay it. They believe there will be blanket debt forgiveness in that regard but I hope people understand that this Bill is not about blanket debt forgiveness and looking after people who can but will not pay.

A great deal of what is contained in this Bill follows on from the recommendations in last year's Keane report. There are some very good recommendations in the Keane report. The flexibility of the Bill can be seen in three different mechanisms used to deal with the personal debt element: the debt relief notice; the debt settlement agreement; and the personal insolvency agreement.

I welcome the reduction in the term of bankruptcy from 12 to three years. That will make bankruptcy a more functioning option than the current under-used alternative.

Deputy Wallace spoke about the behaviour of some of the banks. People in my constituency have come to me, and I have no doubt they have gone to Deputy Wallace and other public representatives in my county, and told me about bank bailiffs calling in the middle of the night and taking machinery out of people's yards because they are unable to make their repayments to the banks. I refer to some of the well known banks like Bank of Ireland and Allied Irish Banks. On occasion people with criminal records, acting on behalf of the banks, have gone in and taken machinery from people and harassed them and their families. Nobody should be treated in that way. We need functioning banks, and I understand they have to make profits, but there are ways and means of doing their business with and for the people. People did not get that type of reception when they went to the bank looking for the loan.

A huge number of people have fallen into bankruptcy through no fault of their own and must remain in that position for 12 years. Very good business people who had viable businesses have fallen into bankruptcy because they were not being paid for the services or goods they provided. This Bill addresses that problem by reducing the period of bankruptcy from 12 to three years. If we are to turn around our economy we need those people who have fallen into bankruptcy back in business and creating jobs. They are often the people who will take the risk, and they have the brains for business. The Bill brings the bankruptcy period within the norm of the European standards.

I have been calling for this legislation through my role in opposition and in government. This is a troika commitment but it is an issue the Government wants to act upon also because if we are to get out of our current circumstances, this Bill will do that. It is an important step for us to modernise the bankruptcy law in that it will provide an incentive for the banks to co-operate with those people in arrears.

I was elected to this House in 2002 and even in that boom period there were people who were unable to pay their mortgages but that situation is becoming more prevalent every day. As a public representative I recall going to local banks on occasion to negotiate with the customer but that no longer happens. The banks will not even listen to people. They refer them to personnel in their head office in Dublin or wherever. They do not even know the personal circumstances behind the case about which one is talking.

This Bill is designed to ensure that homeowners will have every opportunity to remain in their home. It is not about taking their homes from people. People's homes are their castles which they have built up over years. They are where they reared their families and created memories, and they want to remain in them. This Government wants to give that person every opportunity to remain in their family home. People deserve that, especially those who want to pay their mortgage and who will make every effort to pay their mortgage.

People are travelling around the country telling people not to pay the household charge but at the same time they are criticising the banks for not negotiating with people. This is a collective effort to get us out of the economic climate in which we find ourselves and if we are to do that we all must work together, Opposition and Government.

There are people from the Opposition going around the country saying the household charge is an unfair tax, yet they are also telling the Government to pay their mortgage for them. I find something very peculiar about people who are making an effort to pay their mortgage but will not pay their household charge. I encourage anybody who is struggling with a mortgage, especially if they are in arrears, to engage with the lender. If people engage with the lender, they can find a way to get out of their situation. There is no easy solution to tackling mortgage arrears, but it is an issue that must be confronted if people are to remain in their homes. I know everyone has their own difficulties and challenges.

I thank the Minister and the people who put a huge amount of work into this Bill over recent months. It is the most ground-breaking Bill that has been introduced in this House in recent years.

Joe Carey (Clare, Fine Gael)
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I welcome this opportunity to make a contribution to the debate on the Personal Insolvency Bill 2012. This is very important legislation which has been eagerly awaited. The drafting of the Bill has taken some time, but that is understandable given its complexity. I compliment the Minister on presenting the heads of the Bill in draft format to the Joint Committee on Justice, Defence and Equality for debate. This process gave an opportunity to the members of the committee and interested parties to give their views on the legislation at an early stage.

Personal debt has become a major issue for many people in our country. This legislation provides a framework under which it can now be dealt with. The Bill establishes an insolvency service and provides for the licensing and approval of intermediaries and personal insolvency practitioners. These intermediaries will play a key role in advising debtors, negotiating debt settlements and administering the terms of such settlements.

I welcome the three types of voluntary debt settlement arrangements established in the Bill. These are debt relief notices which deal with unsecured debt of less than €20,000, debt settlement arrangements for unsecured debt greater than €20,000 and personal insolvency arrangements, which will be for secured debt of up to €3 million and other unsecured debt. I would like the Minister to clarify the qualifications he envisages are necessary for personal insolvency practitioners. Will there be a conduct of fitness and competency test for personal insolvency practitioners? Will there be a licensing procedure for personal insolvency practitioners?

Over recent years, and indeed this week alone in my clinics, I have heard a number of real life stories of families who are struggling with their debt problems. In many cases their lives lie in ruins and their marriages have often broken down under the stress and strain associated with the financial pressures they face. During the so-called Celtic tiger era, people could not buy property quickly enough and the banking system fed and promoted that desire. People bought houses off plans without even seeing the properties. There was little or no oversight or financial regulation, and this created a perfect storm of unsustainable debt. I very much welcome this Bill for that reason. It provides a mechanism whereby people who have fallen into the black hole of unsustainable debt- personal or mortgage debt or both - are finally being armed with a means to navigate their way out of the deep problems they face.

I want to recognise the role played to date by the money advice and budgeting service, MABS, in assisting families and people through their personal and mortgage debt issues. It is a wonderful organisation which has gained the respect of ordinary people and lending institutions alike. Its role to date cannot be understated. Will it receive extra funding, given the extra caseloads it will receive as a result of the introduction of this legislation?

Part 4 deals with the reform of the bankruptcy process contained in the Bankruptcy Act 1988, as amended. In particular, I welcome the reduction of the length of bankruptcy from 12 years to three. This change brings our State into line with other jurisdictions, is a welcome measure and, critically, will only come into play after a process of meaningful engagement and negotiation has failed. This is a very important aspect of the Bill.

This Bill is a step in the right direction and offers a ray of light where previously there was none. There is no silver bullet to debt resolution, but this Bill is welcome and I congratulate the Minister on his work.

Michelle Mulherin (Mayo, Fine Gael)
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I join colleagues in welcoming the Bill, which will radically reform insolvency law in this country. Many of our citizens will now be able to breathe a sigh of relief and begin to sleep soundly in their beds as a consequence of the introduction of this legislation. We have all heard of the so-called new poor, people who are working hard but unable to keep their heads above water. Many of them are savaged by debt, afraid to open their doors or read their post. Theirs is an existence of dark isolation. People burdened with unmanageable mortgage and personal debt cannot avail of the safety net of our social welfare system. They have struggled to endure under the weight of their burden, with nowhere to turn for relief or support. I take this opportunity to thank the staff of MABS who have offered a lifeline to people in desperate straits.

A significant aspect of the Bill is the reduction of the discharge period for bankrupts from 12 years to three. By changing the status quo so fundamentally, this legislation sends a message to beleaguered people who are worn down by the persistent and insurmountable nature of their debt that there is hope and that their lives are worth more than their debts. People genuinely want to work their way out of debt and this Bill offers them a way to do so. I particularly welcome the onus it will place on banks finally to take a realistic approach in arriving at debt settlement arrangements and workable solutions with individuals. These are the same banks which offered 100% loans on overinflated properties, encouraged customers to finance car purchases by amalgamating the debt with their mortgages so that the payments were spread over 30 years, and offered increased credit card limits week after week. Unfortunately, many succumbed to the temptation.

I welcome the development of concepts and solutions by the Department of the Environment, Community and Local Government, housing agencies, housing associations and various lending institutions. Initiatives such as trade-down mortgages, split mortgages and mortgage to rent schemes offer the possibility that people can retain their family home while simultaneously addressing their debt obligations.

I also welcome the provisions allowing for non-judicial debt resolution processes, which represent a modernisation of our law. I am sure the Minister has noted the recommendation by MABS that the limit of €20,000 in respect of the write-off of debt under the debt relief notice process should be increased. I urge him to consider increasing the limit for agreed settlements in respect of the personal insolvency arrangement from €3 million to €5 million to ensure we have a meaningful process. The numbers facing this type of financial distress are not known because it is a private matter which people will only talk about as a last resort. There are many in white collar professional jobs and many entrepreneurs who were running good enterprises but who are now left with defunct businesses due to the change in our economy's fortunes. They have given personal guarantees and are up to their necks in personal debt. An increase in the threshold to €5 million would offer a realistic prospect of addressing a problem which they themselves are anxious to address.

I have concerns in regard to what body will be authorised to make the assessment as to what is essential income for an individual to live on. That can make all the difference as to whether we are offering a solution, because people have to live at the end of the day and we want them to be able to work this through.

I am also concerned as to how personal insolvency trustees will be funded and paid. I have concerns that such payment would not be necessarily or solely on a commission basis and that people would not be thrown to the wolves in that process. I also compliment the Minister for Justice and Equality, Deputy Shatter. One cannot underestimate the complexities involved in arriving at a correct legislative item that balances the need for people to pay their bills and dues when they can do so with providing people with a lifeline and a hope that in cases in which one will never be able to pay one's debt or bill, there is hope and a solution is at hand. Such a solution may not be easy because ultimately, regardless of what anyone thinks, bankruptcy is not an easy road to take. However, this is a solution and I greatly welcome it.

Brendan Griffin (Kerry South, Fine Gael)
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I am grateful for the opportunity to speak on the Personal Insolvency Bill, which I welcome warmly. It is a substantial and highly complex Bill and I acknowledge the huge amount of work put into it by the Minister for Justice and Equality, Deputy Shatter, and his departmental officials. It probably is one of the most important Bills to be introduced by the present Administration. It has been good to hear so many constructive positions taken on this legislation by Members on all sides of the House in recent weeks. Reform of insolvency law is long overdue in Ireland and some existing laws have been in place since well before the foundation of the State. As a great deal has changed since then, this development certainly is welcome. This Bill will, in law, provide a vital lifeline to many people and families nationwide. I refer to those who effectively are drowning in a sea of debt at present and this legislation offers them a vital lifeline. I welcome many of the measures contained in the Bill, particularly the new non-judicial debt resolution processes it will deliver. In addition, in common with other Members, I welcome the conditional automatic discharge from bankruptcy after three years, rather than the 12-year period that obtains at present. As other speakers have noted, this will give people a second chance and is a reasonable measure. I believe that expecting an economy to recover and to prosper with so much problematic personal debt attached is almost akin to expecting a football team to play well if all one's players are three or four stone overweight. This simply will not happen and speaking from a County Kerry prospective, I tend to believe we know something about football. Similarly, the debt problem has been strangling this economy for some time and this measure at least constitutes a move in the right direction.

In addition, I acknowledge the role and activities of the Money Advice and Budgeting Service, MABS, since the onset of the current crisis in particular. I also acknowledge the positive development that a new office will open in my constituency in Killarney to complement the work being done in the Tralee office. I also take this opportunity to acknowledge the work of counselling centres throughout the country, which have done a huge amount with those who find themselves snowed under with debt. For example, having spoken to the people who run the SouthWest Counselling Centre, Killarney, I have been informed the centre is dealing with an unprecedented number of people who approach it when suicidal, extremely depressed, under pressure and anxious as a result of financial worries. I encourage anyone who may read the Official Report of this debate or who may be watching it on the Internet to talk to and engage with services such as the counselling services and MABS if he or she finds him or herself in such a position.

If enacted, this Bill will form part of the solution to Ireland's overall problems. It will complement the jobs plan, the €2 billion stimulus plan announced yesterday and various other existing incentives to business which the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, has of late been attempting to highlight in an effort to bring jobs for the people and to bring about economic recovery. This legislation also comprises part of the process of getting credit flowing in the economy again because no proper capitalist economy can function without a ready supply of credit. While, unfortunately, no proper availability of credit exists at present, this Bill forms part of the solution in this regard. I reiterate my welcome for the Bill and look forward to hearing further debate on it as it passes through its various stages. I again commend the Minister on the enormous amount of work that has been done in this regard.

Denis Naughten (Roscommon-South Leitrim, Independent)
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I welcome the opportunity to speak on this legislation. The main reason I wished to speak on this Bill is because more than 1,350 families in my constituency of Roscommon-South Leitrim are in arrears of three months or more. The position is the same in every other constituency and many such families now are in a dire situation. Moreover, they now face into the months of August and September in particular, when the additional costs associated with returning to school will force many of them into further significant arrears. Many more families have restructured their mortgages, with approximately half such families going back into arrears. While examining the available statistics regarding those who are in mortgage difficulties at present, I came across a figure to the effect that each day, 85 families are falling into arrears of more than three months, which is a significant statistic in the current climate. These families and thousands more are struggling to manage financially, even though more than €6,000 million has been paid to the banks specifically to address mortgage arrears. However, these families are now obliged to pay on the double because to date, the banks have not been prepared to engage fully with people in mortgage difficulties. It is important to remember that last July, just one year ago, €17 billion was provided to the banks, more than one third of which was targeted specifically to deal with the mortgage arrears. Although the banks have the capacity to absorb some of the losses of distressed mortgageholders, to date this has not happened and they have not been prepared to engage on a realistic basis with many people in serious financial difficulty.

While no one believes that mortgage dodgers should be bailed out, genuine cases arise all the time involving people who are in genuine difficulty and who need assistance and these are the people on whom Members must be focused in respect of this legislation. It is welcome that at long last, the bankruptcy system in Ireland is being reformed because such a system exists to protect society from people who have become excessively indebted. However, the present system is not working for either creditors or for debtors. There is a need to reduce the bureaucracy involved with this process and to provide people who are made bankrupt with a fairer system in which they can discharge their debt and start to contribute positively again to the economy. Bankruptcy should be a penalty for financial mismanagement but it should not be a life sentence for people.

It is important to remember, especially in respect of mortgages, that there are two sides to this issue. I broadly welcome the legislation before Members because it brings back some balance by placing some responsibility back on the banks. It is important to remember it was the banks that shoved mortgages onto many young couples. The banks shoved mortgages on them when they knew in their heart and soul there was no possible way in the long term that such people would be able to repay those mortgages were property prices to stabilise, let alone to collapse to the extent they have. It is unfair that mortgaged families are the ones who have been obliged to bear all the burden to date in this regard.

I note a mortgage arrears resolution process has been entered into by the banks, which were to use that process as a mechanism to try to address the difficulties of young families. While I will revert to the mortgage arrears resolution process shortly, in October 2011 the Central Bank issued a requirement to each of the mortgage lenders to develop a specific strategy and to implement plans to deal with families in serious financial arrears on their mortgages. Since then, however, the Central Bank has tried to force lenders to take a proactive and creative approach to dealing with troubled mortgage holders. It has written to them several times, requesting that these plans be submitted, but it is only in the last month that the banking sector actually submitted plans. That is nearly eight months after the Central Bank had requested the banks to do so. Now we are being told that those initiatives will only be introduced on a pilot basis until the end of this year. This means we are going to see something happen 14 months after the Central Bank requested the mortgage lenders to develop and implement a strategy to deal with distressed mortgages.

The banks' solution in the meantime was to introduce a mortgage arrears resolution process, but that has not worked effectively since then. There has been a disclosure in the media that Ulster Bank refused to change the collection date to the end of the month for one mortgagor that would make it easier for the person to make the mortgage repayments. Permanent TSB threatened the repossession of a mortgage holder because the person refused to set up a direct debit account, even though the person was meeting the revised payments on a monthly basis. The reality is that 50% of the restructured mortgages have gone back into arrears again, so it is clear that the current process in place has failed to deal effectively with the problem. It has only kicked the can down the road. The banks are clapping themselves on the back for the new initiatives being introduced, but they are only pilot schemes and it will be the end of the year before any real steps are taken to deal with families who have significant financial problems. That is why I am concerned about this particular Bill. The banks are not being compelled to participate in the debt resolution process. Based on the performance of the banks since last October, following pressure from the Central Bank, they have failed to live up to their moral responsibility. Unless there is a stick approach to the banks in Ireland, they will fail again to live up to their responsibility. They have been dragged kicking and screaming to the table to put a fair and balanced system in place.

The Bill gives discretion to the courts, and that is a positive step. Must of the Judiciary in this country are fair minded, and I believe that when it is clear in cases before them that the banks have not dealt with mortgage holders in a fair and reasonable process, especially when this Bill is in place, then the banks will throw out those requests for repossession. Once a number of cases like that take place, the banks will reassess the situation on how they manage mortgages in arrears and families in severe financial crisis.

A major personal debt crisis also exists. Up until the end of last year, 315,000 ESB customers were behind with their electricity payments and had to engage in a special arrangement to pay off their debts in small instalments. A recent survey carried out by the credit unions showed that 40% of householders have borrowed to pay their bills in the last 12 months, and 10% of those have gone to moneylenders to do so. A quarter of Irish credit card holders are using their cards to make ends meet at the end of the month. These are the real working poor in this country. They are working hard, paying for the running of this country on a weekly and monthly basis, and yet they are entitled to absolutely nothing from the State. These people are living in fear of the monthly bills such as ESB, phone and fuel bills, and they are living in dread of back to school expenses, Christmas, confirmation or holy communion. These people are not entitled to any social welfare supports. They are over the threshold for everything such as medical cards, back to school allowances and supports for holy communion and confirmation.

People are being forced into financial difficulties due to the operation of our social welfare system. An example of that is the family income supplement, which has to be renewed on an annual basis. It takes up to three months to renew that application. We are talking about people in work who are the poorest of the poor and whom the State recognises as being in receipt of an income so low that is not enough to meet their basic needs on a weekly basis. To keep them in work, the State tops up their salary. However, the State can leave them go for three months without a payment and hope they can live off fresh air, even though the State recognises that they do not have enough money to meet their basic needs. Many of these people now being forced by the State into the arms of moneylenders, who charge up to 190% APR, due to the inefficiency in dealing with these particular renewal applications. These should happen automatically. People should get their payments and by all means they should be reviewed to ensure they are being made fairly. However, it should not take up to three months and force people to go to moneylenders to make ends meet while they wait for the Department of Social Protection to decide they are in a low paid job and need that additional top-up payment to put food on the table and pay basic bills.

It is important the Bill not only deals with mortgage arrears but also that there is some recognition in it of other difficulties in which people find themselves. There needs to be flexibility on the write-down of debt, and I know there is an acknowledgment of this in the Bill, but more needs to be done. The Bill deals with people who are unable to pay their debts in full. There are many people who cannot pay their debts at the current level but who, with a level of write-down, could continue to make repayments and could get back to participating in the economy. It is crucial that such people get back working in the economy. Without their engagement in the economy, we are only undermining the possibility of the economy getting up and running again. These people are the lifeblood of the economy because many of them were the entrepreneurs during the 1990s who created new businesses and jobs and as they have now fallen on hard times, they are up to their eyeballs in debt. Unless they can get out of it, they will not be able to participate actively in the economy, create new businesses in the future and the additional jobs that will be the lifeblood of the economy. I urge the Minister to take a flexible approach to try to encourage the entrepreneurial spirit of those people who have found themselves in debt. The point has been consistently made in the Law Reform Commission report on the reform of indebtedness that we need to support those people because they will be the drivers of the economy in the future.