Alan Shatter (Dublin South, Fine Gael)

I move: "That the Bill be now read a Second Time."

I am pleased to present the Personal Insolvency Bill to the House. This is a significant Bill which provides for comprehensive reform of insolvency law and practice. It provides for new, more flexible options to address the circumstances of insolvent debtors. It addresses the obligations of debtors and the rights of creditors in a proportionate and balanced way, having regard to the financial reality of individual circumstances.

The development of modern insolvency law is a key commitment in the programme for Government. It was also required by the terms of the EU-IMF-ECB programme of financial support for Ireland. The reform also has regard to the recommendation made in the interdepartmental working group on mortgage arrears report of October 2011, known as the Keane report. The report states: "The early introduction of new judicial and non-judicial bankruptcy options is vital" and "Without effective bankruptcy legislation the mortgage arrears problem will not be resolved". It would be remiss of me not to mention the significant contribution made by the Law Reform Commission in its December 2010 report on personal debt management and debt enforcement. This report and earlier work were of considerable assistance in the formulation of the Bill.

The general scheme of the Bill was published for consultation by the Government on 25 January. Several important submissions, in particular the report of the Joint Committee on Justice, Defence and Equality, were received in response and taken into account in the finalisation of the Bill. I thank all those who responded in such a positive way. While the primary architecture remains the same, considerable development of the individual provisions in terms of legal and technical detail has taken place to provide for a more coherent approach in the Bill.

Essentially, the Bill provides for the reform of personal insolvency law and will introduce three new non-judicial debt resolution processes, the first of which is the debt relief notice which will allow for the write-off of qualifying unsecured debt up to €20,000, subject to a three year supervision period. Second, the Bill provides for a debt settlement arrangement for the agreed settlement of unsecured debt over five years. Third, 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.

To protect the constitutional rights of all concerned and prevent potential actions for judicial review, the Bill makes provision for enhanced oversight by the Circuit Court, or the High Court where the debts concerned are in excess of €2.5 million, of the three new debt resolution procedures. In response to some misguided comments it will be useful to set out in some more detail the process involved. I expect to see an enhanced role for County Registrars. The Circuit Court will receive the debtors case file from the insolvency service with an application for a debt relief notice or a protective certificate in respect of a debt settlement arrangement or personal insolvency arrangement. The court's consideration or hearing will take place on an ex parte basis, neither debtor nor creditor will be required to be present and thus no time delays or costs are incurred. This efficient procedural approach is repeated at the conclusion of the three year supervision period for the debt relief notice or on the conclusion by the parties concerned of a successful debt settlement arrangement or personal insolvency arrangement proposal prior to its formal registration. I hope this proposed scenario will help to calm the fears of Members who have expressed concern that persons would become tied up in expensive and time consuming court hearings. That will not be so. A court hearing will only be necessary subsequently where a creditor objects on one of the grounds specified in the legislation. This is consistent with the approach recommended by the Law Reform Commission.

This enhancement of court involvement has the significant benefit to the debtor of providing protection from enforcement actions by creditors, either during the negotiation period or during the lifetime of the arrangement. It is likely that debtors would be the subject of judgments obtained by creditors. Such protection from enforcement action could not be provided by a non-judicial agency. I am surprised that this point seems to have been overlooked. In addition, the involvement of the court also ensures our new processes will be capable of meeting the criteria in regard to the European Union insolvency regulations and will recognise cross-border insolvency procedures. This is a matter of particular importance.

The Bill will continue the reform of the Bankruptcy Act 1988 which I began in the Civil Law (Miscellaneous Provisions) Act 2011. The critical new provision is the introduction of automatic discharge from bankruptcy, subject to certain conditions, after three years in place of the current 12 year arrangement.

The Insolvency Service of Ireland will be established to operate the new insolvency processes and provide a focal point for development of insolvency policy. I am advancing the organisational planning for the new service and the director designate will likely be appointed during the summer. However, as the new service will administer a completely new approach to insolvency in the State, with new and complex legal provisions, it will require time to become operation ready. It is my expectation that the service will be in a position to commence operation in January 2013, or very shortly thereafter. We cannot rush the proper and necessary preparation; there is too much at stake for too many people to get it wrong. While I recognise the concerns of those who want an immediate introduction, I will not sacrifice getting the service right for an undue haste. We are all aware of the consequences when technology fails in a financial management context, as in the past few weeks.

As to the number of persons who may seek to avail of the new or reformed insolvency processes, it is difficult to be precise. It will very much depend on individual circumstances and the nature and extent of the debts involved. However, for broad planning purposes, there is a tentative estimate, based on a rough extrapolation from the comparable UK and Northern Ireland circumstances, of the following applications for the first full year of operation of the new law and systems: 15,000 applications for non-judicial debt resolution – debt settlement arrangement and personal insolvency arrangement; 3,000 to 4,000 applications for debt relief notices; and 3,000-plus bankruptcy applications. There were about 30 bankruptcy adjudications in 2011. This number gives an insight into the contrasting increase in work that will arise on the implementation of this Bill.

These estimates are tentative. Not all insolvencies will require to be dealt with under the new statutory debt resolution processes or bankruptcy. I would expect that the certainty brought to the future legal landscape by this Bill will encourage debtors and creditors to agree bilaterally on alternative solutions, including in respect of mortgage debt under the mortgage arrears resolution process operated by mortgage lenders under the supervision of the Central Bank.

The provisions of this Bill will require careful consideration by all potentially concerned therewith. However, individual circumstances vary and the solutions found within the context of the debt settlement arrangement and personal insolvency arrangement processes will also vary. I must continue to emphasise that the Bill makes it clear that those persons experiencing difficulties in regard to debt should, primarily, engage with their lenders so as to negotiate an appropriate settlement.

Lenders should also engage properly with customers. Now that the architecture of our new insolvency legislation is clear, it is my hope that financial institutions that have not to date engaged constructively or realistically with borrowers who are overwhelmed by unsustainable debt and unable to discharge their monthly outgoings will now do so with greater flexibility and insight and apply a broader range of common-sense options based on financial reality.

There is no question of the Government forcing settlements on either debtors or creditors. Such an approach would invariably run into legal and constitutional difficulties. It would also not be an optimal way to decide the performance of a contract by one or other of the parties bound by it. The new debt settlement arrangement and personal insolvency arrangement processes described in this Bill facilitate a voluntary deal between a debtor and a specified majority of his or her creditors.

We should not forget that there are many different creditors who may be potentially involved in the new processes. Many persons or companies may be both debtors and creditors. While I can understand the somewhat visceral feelings towards financial institutions and their contribution to our current economic difficulties, we must not lose sight of our objective, which is to introduce reformed, workable and balanced insolvency legislation. Such legislation is a required feature of any properly functioning economy. It will assist not only debtors and financial institutions, but also corner shops, tradespersons, local co-operatives, etc. All debtors and creditors are concerned by this reform. For their sake and the sake of the wider economy, all must be treated fairly. Many individuals are currently in personal financial difficulty because of the failure of other individuals to pay for work properly completed or goods or services supplied to them.

This approach, which seeks balance and fairness, has been criticised by some commentators as suggesting that creditors, particularly mortgage creditors, will exercise a veto. Such a contention is based on an odd view of how normal commercial contractual issues may be resolved. Where one borrows, one must repay where one can. If, for example, an individual paints one's home or retail outlet or does essential electrical repairs, that individual is entitled to be paid. If the debtor is genuinely unable to pay, negotiation with creditors may resolve the difficulty, and this Bill provides the new framework for sensible negotiation.

The underlying philosophy of the debt settlement arrangement and personal insolvency arrangement is that the insolvent debtor will, with the assistance of a personal insolvency practitioner, put forward what the debtor considers to be a realistic offer to his creditors, one that will restore the debtor to solvency within a reasonable period while at the same time giving creditors a better financial outcome than the alternatives of debt enforcement or bankruptcy. The creditors will need to consider carefully the debtor's offer, conscious that if they refuse, the debtor has another option - the standard debt discharge procedure available under the reformed bankruptcy laws. That is the ultimate appeal mechanism of the debtor. However, in that eventuality, which is best avoided, control is effectively lost by both sides. It would make sense for the debtor and creditor, especially where there is only one main creditor, to seek to conclude a bilateral agreement. The reform I am introducing will, in addition to providing new legal remedies, provide a significant incentive for financial institutions to develop and implement realistic agreements to resolve debt issues with their customers.

I was surprised to read articles by Members of this House whom one imagined had a modicum of financial knowledge calling for some form of enforced arbitration by a third party. How this would be imposed, we were not told. Having regard to the legal and constitutional rights involved, a common-sense rather than a coercive approach is taken, as expressed in the creditor voting process provided for in the Bill. The approval process for the debt settlement arrangement and personal insolvency arrangement is consistent with practices in comparable jurisdictions. Under the individual voluntary arrangement procedure in England, Wales and Northern Ireland, the approval of over 75%, in value terms, of creditors voting at the creditors' meeting is required. Similarly, in Australia and Canada, there are debt settlement processes that involve majority approval by creditors.

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

The Bill provides that an application for a debt settlement arrangement or personal insolvency arrangement must be made by a debtor through a personal insolvency practitioner, PIP. The debtor is entitled to appoint any authorised PIP of his or her choosing. The time available to finalise the text of the Bill for publication has not permitted the development of a definite approach for the regulation of persons to act as PIPs in the debt settlement arrangement and personal insolvency arrangement processes. Thus, the Bill essentially provides for an enabling section in regard to the regulation of PIPs. I will continue to examine all of the relevant issues in order to bring forward proposals on Committee Stage. I expect that those persons who come forward to seek regulation as insolvency practitioners will likely be drawn from the legal and accountancy professions. However, other suitably qualified persons who are not members of those professions may also be interested. This has proved to be the case in other jurisdictions.

The Bill requires that the terms of the arrangement proposal make provision for the fees and outlays of the PIP and specify the manner in which they will be paid. Those terms are subject to the approval of both the debtor and the requisite majority of creditors. Generally speaking, the costs of personal insolvency practitioners involved in the management of any form of insolvency are met by the product of that insolvency. There are no provisions under the Bill for the State to pay the fees of personal insolvency practitioners.

The provision in regard to PIPs has attracted considerable attention from potential applicants. I am thus conscious of the need to develop swiftly the requisite legislative provisions. However, my Department is not maintaining a register of persons interested in becoming personal insolvency practitioners. Neither will my Department or the proposed insolvency service of Ireland be involved in the recruiting of PIPs.

In regard to dealing with insolvency, the role of the Money Advice and Budgeting Service, MABS, has been raised. MABS will continue in its valuable role of assisting and advising people with debt problems. MABS has agreed to operate as an approved intermediary in regard to processing applications for debt relief notices where it is likely to be the main such intermediary. Other organisations have also indicated an interest in becoming involved in the processing of debt relief notice applications. These would most likely be non-profit organisations rather than personal insolvency practitioners.

Determination of appropriate guidelines with regard to the reasonable expenses that may be allowed to or negotiated by debtors in an insolvency process will require further consideration. There are no such guidelines readily available or agreed at this point. Different organisations, both public and private, will have their own views and proposals in this regard. This is an area of work with which MABS is particularly familiar in the context of its current operations.

The issue of reasonable living expenses is of particular importance in the application process for the debt relief notices. Where the applicant has a disposable income of less than €60 per month after allowing for reasonable living expenses and assets and savings of less than €400, with exemptions for essential household or work items and a vehicle worth up to €1,200, he or she will be entitled to a presumption of qualifying for the debt relief notice by the insolvency service in making its determination.

The completion of the prescribed financial statement in the case of each debt relief notice, debt settlement arrangement and personal insolvency arrangement will assess in detail lifestyle expenditures. The approved intermediary or the personal insolvency practitioner, as the case may be, will take account of the obvious basic necessities of living, for example, food, heat and light, etc. However, he or she will question the continuation by the debtor of certain other lifestyle expenditures. Persons who are insolvent cannot realistically expect either creditors or the taxpayer to fund a lifestyle that has been based on credit. This approach is not intended to be ungenerous, but we must be realistic to prevent possible misuse.

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

I was somewhat disappointed with the negative reaction of the financial institutions to publication of the Bill. I can understand their desire to have a much greater deciding role in the new arrangements. However, they will ultimately acknowledge the need for the correct balance and the maximum flexibility and to come to terms with the concerns of debtors. I recognise that they are seized of the importance of addressing the problem of accumulated debt. Our shared objective must be to assist the greatest possible number of borrowers who are experiencing genuine mortgage arrears problems to be restored to sustainability. For this to occur, the financial institutions will have to provide a larger and more imaginative range of financial debt resolution options to address individual customers' financial reality and acquire staff with the expertise to properly engage with customers labouring under the weight of unsustainable debt. Existing staff will also have to be properly trained in that regard. If the financial institutions fail to do so, they will unnecessarily drive indebted customers into bankruptcy to the detriment of the financial institutions which may ultimately recover less of the debt owed than could be recovered under a personal insolvency arrangement.

While my focus today must be on outlining to the House the provisions contained in the Bill, it is important to reiterate what is not in it. The Bill does not provide for the automatic writing-off of debt, either secured or unsecured, in the debt settlement arrangement or personal insolvency arrangement processes. An agreement that is reasonable and workable for all parties must be concluded on a case by case basis. Where a debtor is not insolvent and can meet obligations to service his or her mortgage or other debt obligations, he or she must continue to do so. The Bill does not provide for any process, whereby negative equity can be written-off for solvent debtors able to meet their repayment obligations. Such a phenomenon is a reflection of the current market value of the asset concerned. It does not exclusively relate to residential property. It could, for example, concern shares or art. Negative equity is not an issue of insolvency for the purposes of the Bill; it is a consideration of whether the debtor can pay his or her bills as they fall due. Of course, where an individual's debts are unsustainable, negative equity may form part of his or her overall financial burden. It is important to emphasise the Bill does not relieve solvent debtors of their responsibility to meet their contractual obligations.

I now turn to the detail of the main provisions of the Bill. Part 2, containing sections 7 to 21, inclusive, provides for the establishment of a new Insolvency Service of Ireland to operate the new non-judicial debt resolution processes. It sets out the functions and powers of the new service and its governance arrangements. The Insolvency Service of Ireland will have the structures, functions and powers consistent with an effective, independent body.

The new service will have a role in certifying applications for a debt relief notice or a debt settlement arrangement and a personal insolvency arrangement and, thereafter, referring the relevant documentation to the Circuit Court or the High Court in the context of arrangements relating to assets which exceed a value of €2.5 million. The Insolvency Service of Ireland has no role in the negotiation and agreement of the terms of either a debt settlement arrangement or a personal insolvency arrangement.

The central core of the Bill is Part 3 which provides in its six chapters for the three new non-judicial debt resolution processes, the appointment of personal insolvency practitioners, offences and some miscellaneous provisions. Chapter 1 provides for the issue of a debt relief notice. This will permit the write-off of qualifying debts totalling not more than €20,000 for persons with no income and no assets, who are insolvent and have no realistic prospect of being able to pay their debts within the next five years. The intention is to create an efficient non-judicial process for allowing such persons to solve unmanageable debt problems. The process is akin to bankruptcy in its broad approach, including a three year supervision period, but provides for a low cost insolvency option, having regard to the quantum of debt involved.

Section 23 provides that an application for a debt relief notice will be subject to certain eligibility criteria. First, the debtor must have qualifying debts of €20,000 or less. Debts qualifying for inclusion in a debt relief notice are most likely to be unsecured debts such as credit card, personal loans or catalogue payments. A debtor will not be eligible to apply for a debt relief notice where 25% or more of the qualifying debts were incurred in the six months preceding the application. Among the debts that will be excluded from a debt relief notice are taxes, court fines, family maintenance payments and service charges arrears. A debtor will only be eligible for a debt relief notice if he or she has a net monthly disposable income of €60 or less after making provision for reasonable living expenses and payments in respect of excluded debts.

The value of any assets held by the debtor, whether individually or jointly with another person, must be €400 or less. There will be an exemption for essential household appliances, tools or equipment required for employment or business and one motor vehicle up to value of €1,200. There has been some comment that personal items of jewellery should also be exempt from the asset test for the debt relief notice. I am mindful of the sentimental, as much as actual, value of items such as engagement rings, etc. However, given the potential for misuse of such a possible exemption, I would need to hear very convincing arguments as to why a person applying for a full debt write-off of up to €20,000 from his or her creditors should be allowed to retain expensive items of jewellery which might be sold to repay some of the debt incurred. Only one debt relief notice per lifetime will be permitted and it cannot be applied for within five years of completion of a debt settlement arrangement or a personal insolvency arrangement.

Section 24 sets out how the debt relief notice process is initiated by the debtor. An application for a debt relief notice must be submitted on behalf of the debtor by an approved intermediary, for example, the Money Advice and Budgeting Service. The approved intermediary will advise the debtor on his or her options and the qualifying requirements. The intermediary will assist the debtor in preparing the necessary prescribed financial statement which must be verified by means of a statutory declaration and any other required documentation. A debtor who participates in the debt relief notice process is at all times under an obligation to act in good faith and co-operate fully in the process. If the qualifying criteria for the debt relief notice are met, the authorised intermediary will transmit the debtor's application, under section 25, to the Insolvency Service of Ireland.

Section 26 provides that on receipt of a completed application for a debt relief notice, the Insolvency Service of Ireland must consider it and make such inquiries as it considers appropriate to verify the information, including inquiries with the Department of Social Protection, the Revenue Commissioners and local authorities. The service will be entitled to presume that the eligibility criteria for the debt relief notice have been met if it has no reason to believe the information is incomplete or inaccurate.

Section 27 provides that if the Insolvency Service of Ireland is satisfied that the application is in order, it shall issue a certificate to that effect and furnish the certificate and supporting documentation to the appropriate court. The court will consider the application and, if satisfied, issue the debt relief notice and notify the service.

Section 29 requires the Insolvency Service of Ireland to notify the approved intermediary and the creditors of the issue of the debt relief notice and register it in the Register of Debt Relief Notices. Under section 30, the effect of the issue of a debt relief notice is that the debtor is subject to a supervision period of three years from the date of issue, unless the court has ordered it to be terminated before then. During that period section 31 provides that creditors may not initiate or prosecute legal proceedings or seek to recover payment for a debt or recover goods or contact the debtor.

Section 32 requires the debtor to inform the authorised intermediary and the insolvency service of any material change in financial circumstances. So as not to reduce the incentive to seek and obtain employment following approval of a debt relief notice, there is provision for debtors to repay a portion of the debts in circumstances where their financial position improves. These circumstances include receipt of gifts or windfalls of more than €500 or where the debtor's income has increased by more than €250 per month. There is a restriction on the debtor applying for credit of more than €650 during the debt relief notice supervision period without informing the person of his or her status.

Section 33 provides that should a debtor make repayments totalling 50% of the original debt, the debtor will be deemed to have satisfied the debts in full. In such a case, the debt relief notice will cease to have effect, the debtor will be removed from the register and all of the debts concerned will be discharged.

Under section 34, funds transmitted by the debtor to the insolvency service are to be paid on a pari passu or proportionate basis to the listed creditors. After the three year supervision period has come to an end, section 42 provides that the qualifying debts will be discharged and the debtor will be removed from the register of debt relief notices.

Chapter 2 of Part 3 makes provision for the appointment of personal insolvency practitioners for the purposes of applying for a debt settlement arrangement or personal insolvency arrangement. Sections 44 to 49, inclusive, provide for a range of practical matters in regard to the appointment of a personal insolvency practitioner, the duties and obligations on such a practitioner and the documents to be prepared for an application for a debt settlement arrangement or personal insolvency arrangement.

A key requirement, provided for in section 46, is the completion of the prescribed financial statement by the debtor with the assistance of the personal insolvency practitioner. The prescribed financial statement, which must be verified by means of a statutory declaration, is the critical element in an application for a debt resolution process. The details required to be included in the prescribed financial statement may be prescribed by ministerial regulation under section 130.

Chapter 3 of Part 3 provides for a system of debt settlement arrangements between a debtor and one or more creditors to repay an amount of unsecured debt over a period of up to five years, with a possible agreed extension to six years. The debt settlement arrangement would assist persons who have such income and assets and debts that they would fall outside the eligibility criteria for a debt relief notice. Sections 50 to 83, inclusive, provide for all aspects of the eligibility, application, determination, duties and obligations arising, court approval, objection by creditors and discharge from qualifying debts under the debt settlement arrangement process.

Section 50 provides that the application for a debt settlement arrangement must be made through a personal insolvency practitioner appointed by the debtor. The personal insolvency practitioner must advise the debtor as to their options in regard to insolvency processes. The practitioner will assist the debtor in the preparation of the necessary prescribed financial statement, which must be verified by means of a statutory declaration, and any other required documentation. A joint application by two or more debtors is permitted where the particular circumstances may warrant such approach.

Section 51 provides that only one application for a debt settlement arrangement in a lifetime is permitted. Section 52 sets out the eligibility criteria for a debt settlement arrangement. The debtor must normally be resident in the State or have a close connection. Section 53 provides that if the debtor satisfies the eligibility criteria, the personal insolvency practitioner will apply to the insolvency service for a protective certificate in respect of the preparation of a debt settlement arrangement.

Under section 55, if the insolvency service is satisfied that an application for a debt settlement arrangement is in order, it must issue a certificate to that effect and furnish the certificate and supporting documentation to the appropriate court. The court will consider the application and, subject to the creditor's right to appeal, if satisfied, issue the protective certificate and notify the insolvency service. In considering the application, the court will be entitled to treat the insolvency service certificate as evidence of the matters certified in relation to the application. The insolvency service will register the protective certificate in the register of protective certificates. The personal insolvency practitioner will inform the creditors of the issue of the protective certificate. When the protective certificate is issued, a "standstill" period of 70 days will apply to permit the personal insolvency practitioner to propose a debt settlement arrangement to the listed creditors. That period, on application to the court, may be extended for not more than 40 days.

Section 56 provides that the effect of the issue of the protective certificate is that creditors may not initiate or prosecute legal proceedings or seek to recover payment for a debt or recover goods or contact the debtor. The rights of secured creditors are unaffected.

Section 59 provides that certain debts are excluded from a debt settlement arrangement, including court fines in respect of criminal offences. In addition, certain other debts are also excluded, such as family maintenance payments, taxes, local authority charges and service charges.

While there is provision for a wide range of repayment options, the default position under section 60, unless otherwise agreed, is that creditors be paid on a pari passu or proportionate basis. Under section 61, any debt that would have a preferential status in bankruptcy will also have a preferential status in a debt settlement arrangement. Under section 63, a debt settlement arrangement proposal will generally not require the debtor to dispose of or cease to occupy his or her principal private residence unless the debtor does not wish to continue to occupy it or the costs of the debtor continuing to reside in it are disproportionately large.

Section 67 provides that if the debt settlement arrangement proposal is accepted by 65% in value of the creditors present and voting at the creditors' meeting, it will be binding on all creditors. Under section 69, the personal insolvency practitioner must inform the insolvency service of the approval of a proposed debt settlement arrangement. The insolvency service will then transmit the arrangement in accordance with section 70 to the appropriate court for approval.

Section 72 provides that if the court is satisfied with the proposed arrangement and if no objection is received by it within ten days, the court shall approve the debt settlement arrangement and notify the insolvency service. The arrangement will come into effect when it is registered by the insolvency service in the register of debt settlement arrangements. The personal insolvency practitioner will then administer the debt settlement arrangement for its duration. For section 72 to be consistent with section 69, it should refer to a period of 21 days rather than ten days. This drafting error will be corrected on Committee Stage.

There is provision for an annual review of the financial circumstances of the debtor under section 74. Section 75 sets out the conditions that attach to the conduct of the debtor during the debt settlement arrangement. The arrangement can, if necessary, be varied under section 76 or terminated under sections 77, 78 or 79. On the termination or failure of the debt settlement arrangement, section 81 provides that a debtor could risk an application for adjudication in bankruptcy. Section 82 provides that at the satisfactory conclusion of the debt settlement arrangement, all debts covered by it are discharged.

Chapter 4 of Part 3 provides for a system of personal insolvency arrangements between a debtor and one or more creditors to repay an amount of both secured and unsecured debt over a period of six years, with a possible agreed extension to seven years.

The personal insolvency arrangement will assist those persons who have difficulty in the repayment of both secured debt, such as mortgage arrears and unsecured debt. Sections 84 to 119, inclusive, provide for all aspects of the eligibility, application, determination, duties and obligations arising, court approval, objection by creditors and discharge from qualifying debts under the personal insolvency arrangement process.

Section 85 provides that the application for a personal insolvency arrangement must be made through a personal insolvency practitioner or PIP appointed by the debtor. The personal insolvency practitioner must advise the debtor as to his or her options in regard to insolvency processes. A joint application by two or more debtors or an interlocking personal insolvency arrangement is permitted where the particular circumstances might warrant such approach. Section 86 provides that only one application for a personal insolvency arrangement in a lifetime will be permitted.

Under section 87, a debtor may propose a personal insolvency arrangement only if he or she is cashflow insolvent, meaning that the debtor is unable to pay his or her debts in full as they fall due, and there is no likelihood within a period of five years that the debtor will become solvent. The personal insolvency practitioner will assist the debtor in the preparation of the necessary prescribed financial statement, which must be verified by means of a statutory declaration, and any other required documentation.

The eligibility criteria for a personal insolvency arrangement under section 87 include co-operation with the secured creditor in respect of the debtor's principal private residence under a mortgage arrears process approved or required by the Central Bank. The debtor must be normally resident in the State or have a close connection. If the debtor satisfies the eligibility criteria, the personal insolvency practitioner may apply to the insolvency service under section 88 for a protective certificate in respect of the preparation of a personal insolvency arrangement.

Section 90 provides that if the insolvency service is satisfied as to the application, it must issue a certificate to that effect and furnish the certificate and supporting documentation to the appropriate court. The court will consider the application and, subject to the creditor's right to appeal, if satisfied, issue the protective certificate and notify the insolvency service. The insolvency service will register the protective certificate in the register of protective certificates. When the protective certificate is issued a "standstill" period of 70 days will apply to permit the personal insolvency practitioner to propose a personal insolvency arrangement to the listed creditors. That period, on application to the court, may be extended for not more than 40 days. The personal insolvency practitioner will inform the creditors of the issue of the protective certificate.

Under section 91, the effect of the issue of the certificate is that the creditors may not initiate or prosecute legal proceedings or seek to recover payment for a debt or recover goods, enforce security or contact the debtor. Section 94 provides that certain debts are excluded from the personal insolvency arrangement, including court fines in respect of criminal offences. In addition, certain other debts are excluded, such as family maintenance payments, taxes, local authority charges and service charges, unless the relevant creditor agrees otherwise. Under section 96, any debt that would have a preferential status in bankruptcy also will have a preferential status in a personal insolvency arrangement.

There are certain specific protections for secured creditors under sections 97 and 98, including a claw-back in the event of a subsequent sale of a mortgaged property where the mortgage has been written down. Under section 99, a personal insolvency arrangement proposal will in general not require the debtor to dispose of or cease to occupy his or her principal private residence unless the debtor does not wish to continue to occupy it or the costs of the debtor continuing to reside therein are disproportionately large. This provision is of particular importance to assist those with unsustainable debt in concluding realistic and common sense arrangements that facilitate the debtor continuing to reside in his or her family home.

Under section 105, a personal insolvency arrangement must be supported in the first instance by a majority of creditors representing at least 65% in value of the total of both secured and unsecured debt due to the creditors voting at the meeting and second, more than 50% of secured creditors voting, based on the lesser of value of the security underpinning the secured debt or the amount of that debt and third, by 50% of unsecured creditors based on the amount of the debt. If the personal insolvency arrangement proposal is accepted at the creditors' meeting and approved by the court, it is binding on all creditors.

Under section 107, the personal insolvency practitioner must inform the insolvency service of the approval of the proposed arrangement by the creditors' meeting. The service will then transmit the arrangement in accordance with section 108 to the appropriate court for approval. Section 110 provides that if the court is satisfied with the proposed arrangement and if no objection is received by it within ten days, the court shall approve the personal insolvency arrangement and notify the insolvency service. The arrangement will come into effect when it is registered by the service in the register of personal insolvency arrangements. The personal insolvency practitioner will then administer the personal insolvency arrangement for its duration. Again, I note that section 110, to be consistent with section 107, should in fact refer to 21 days and not ten days and this drafting error will be corrected on Committee Stage.

There is provision for an annual review of the financial circumstances of the debtor under section 112. Section 113 sets out the conditions that attach to the conduct of the debtor during the personal insolvency arrangement. The arrangement can, if necessary, be varied under section 114 or terminated under sections 116 or 117. Section 119 provides that at the satisfactory conclusion of the personal insolvency arrangement, all unsecured debts covered by it are discharged. Secured debts are only discharged at the conclusion of the personal insolvency arrangement if, and to the extent, specified in the arrangement.

Chapter 5 of Part 3 provides for offences relating to all of the non-judicial debt resolution processes. Sections 120 to 125, inclusive, provide for offences including false representations, falsification of documents and fraudulent disposal of property. The offences may be prosecuted either summarily or on indictment. Section 126 provides for penalties, following conviction on indictment, of fines of up to €100,000 or imprisonment for up to five years or both. Chapter 6 of Part 3 contains provisions that apply generally to Part 3. Among other things, it provides in section 127 for the creation and maintenance by the insolvency service of the insolvency registers to record details of persons concerned with the various debt resolution processes. The registers will be in electronic form and members of the public may inspect a register and may take copies of or extracts from entries in a register.

Part 4 of the Bill provides for a number of amendments to the Bankruptcy Act 1988 to provide for a more enlightened and modern approach to bankruptcy. These amendments will continue the reform of bankruptcy law begun in the Civil Law (Miscellaneous Provisions) Act 2011.

I will now outline the main new provisions. Section 132 provides that the minimum amount for a petition for bankruptcy by a creditor or combined non-partner creditors will be increased to €20,000. The current limits are €1,900 for a creditor and €1,300 for combined non-partner creditors. In addition, there will be a new requirement for 14 days' notice of the petition to be provided. This is to ensure that a bankruptcy summons is not brought prematurely by a creditor, so as to allow the debtor to consider other options such as a debt settlement arrangement or a personal insolvency arrangement. Section 133 provides that in presenting a petition for bankruptcy, the creditor will be required to prove for a debt of more than €20,000, a significant increase from the current limit of €1,900. Where a debtor presents a petition for bankruptcy, he or she must swear an affidavit that he or she has made reasonable efforts to make use of alternatives to bankruptcy, such as a debt settlement arrangement or personal insolvency arrangement. The debtor must also present a statement of affairs, which must disclose that his or her debts exceed his or her assets by more than €20,000.

Section 134 will require the court, when considering a petition from a creditor, to have regard to whether that creditor may have unreasonably refused a proposal for a debt settlement arrangement or personal insolvency arrangement. In adjudication of a creditor's petition for bankruptcy, under section 135 the court will be required to consider the assets and liabilities of the debtor and assess whether it should adjourn proceedings to allow the debtor to attempt to enter into a debt settlement arrangement or personal insolvency arrangement. A bankrupt is permitted to retain certain excepted articles, such as household furniture or tools or equipment required for a trade or occupation. Section 138 will increase the maximum value of those excepted articles from the current level of €3,100 to €6,000. As regards avoidance of fraudulent preferences and certain transactions made before adjudication in bankruptcy, the current applicable time periods of one year will be extended to three years by sections 139 and 140. The time periods in regard to the avoidance of certain voluntary settlements of property made before adjudication in bankruptcy will be extended from two years to three years by section 141.

Section 143 contains extensive new provisions regarding discharge from bankruptcy. First, provision is made for the automatic discharge from bankruptcy after three years from the date of adjudication, which is reduced from the current 12 years. Second, bankruptcies existing for three years or more at the time of commencement of the Act will be automatically discharged after a further six months have elapsed. This latter time is to allow for any possible creditor objection. Third, the bankrupt's unrealised property will remain vested in the official assignee in bankruptcy after discharge from bankruptcy. The discharged bankrupt will be under a duty to co-operate with the official assignee in the realisation and distribution of such of his or her property as is vested in the official assignee. Fourth, the official assignee or a creditor will be permitted to apply to the court to object to the discharge of a person from bankruptcy. The grounds for such an objection are that the debtor has failed to co-operate with the official assignee or has hidden or failed to disclose income or assets. The court may suspend the discharge pending further investigation or extend the period before discharge of the bankrupt to a date not later than the eighth anniversary of the making of the adjudication order. Finally, the court may order a bankrupt to make payments from his or her income or other assets to the official assignee or the trustee in bankruptcy for the benefit of his or her creditors. In making such an order, the court must have regard to the reasonable living expenses of the bankrupt and his or her family. The court may vary a bankruptcy payment order where there has been a material change in the circumstances of the discharged bankrupt. Such an order must be applied for before the discharge from bankruptcy and may operate for no more than five years.

Part 5 of the Bill contains an enabling provision in regard to the regulation of personal insolvency practitioners. However, a definitive approach to the regulation of personal insolvency practitioners awaits final decision and will be the subject of a legislative proposal at a later stage. I am conscious that further development of the text of the Bill is necessary in regard to a number of issues. This work will continue and it is my intention to bring forward further relevant proposals and amendments during the progress of the Bill through the Oireachtas in the autumn.

No one should underestimate the complex legal issues involved in this very large-scale reform of Ireland's personal insolvency law and practice. The consequences and implications of new debt resolution processes must be very carefully assessed. There is a delicate balance to be struck between the various legal rights and obligations of the parties involved. The outcome must be both fair and workable for creditors and debtors alike. Not to do so would make worse a situation that already is difficult for the parties concerned. The development of any new laws, particularly those which are without legal precedent in any other jurisdiction, namely, the personal insolvency arrangement element of the Bill, which provides for the settlement of secured debt as such, required very careful legal drafting. My Department has worked closely with the Office of the Attorney General and Parliamentary Counsel, as well as the Department of Finance to develop the Bill. It is a significant part of the Government's reform agenda. It will create a modern and fairer approach to dealing with unsustainable debt, which is in the best interests of the debtor and the wider society and economy and in is line with international best practice.

It will change the relationship between insolvent borrowers and their lenders. It will give a greater balance to the rights of the borrower and the lender and incentivise both parties to come to an agreed solution. The new legislation will carefully distinguish between individuals who cannot pay as opposed to those who will not pay, so as to ensure there is no suggestion that borrowers can easily leave outstanding debts behind them. This will be achieved through the necessity of the borrowers declaring honestly and openly their financial affairs, the strict eligibility criteria and the anti-abuse provisions resulting in criminal prosecution.

For individuals who are insolvent without any reasonable prospect of being able to repay their debts, the new legislation will allow them to rehabilitate their unsustainable financial situation over a defined period. The introduction of the legislation should serve to support greater stability in the financial sector, as the introduction of the Personal Insolvency Bill 2012 will incentivise banks to reach an agreed solution with individual borrowers in resolving mortgage arrears cases. These non-judicial mechanisms are premised on both debtors and creditors obtaining a better outcome than under the reformed bankruptcy regime.

I hope the provisions of this Bill will receive careful consideration by all potentially affected by it. However, I stress that individual circumstances vary and that the solutions found within the context of the debt settlement arrangement and personal insolvency arrangement processes will also vary, depending on individual circumstances and the nature of indebtedness that exists. The Bill is a major milestone on the road to the development of a modern insolvency process in Ireland. It is a long over-due step. Much remains to be done, but the journey to real reform, of benefit to our citizens, has begun and will be completed by the end of the year. I commend the Bill to the House and I hope it has the general support of all Members.

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