Paul Connaughton (Galway East, Fine Gael)

Figures from the Central Bank for the fourth quarter of 2011 showed that household debt in Ireland was €184.6 billion, or €41,000 per person. That figure makes for dismal reading and the reality behind it is sleepless nights for thousands of people for whom, whichever way they add up their assets and liabilities and factor in their income, both current and projected, there appears to be no way out of their financial dilemma. The Personal Insolvency Bill now before the House aims to provide those householders with some answers.

The Bill provides relief for a small percentage of people currently burdened with major debt, people who are insolvent. For home owners struggling to pay their mortgage who want to retain ownership of their home, the Bill is not a panacea. However, I welcome the fact that the people working at the coalface of the household debt problems in Ireland, particularly groups such as the Money Advice & Budgeting Service and the free legal advice centres, have had their voices heard in the drawing up of this Bill. Such people are only too aware that the current insolvency arrangements in Ireland are completely outdated and are of little use to indebted householders. Recent figures from the Courts Service bolster this argument. Despite the tsunami of debt under which many households are struggling, in 2008 there were only eight bankruptcies. In 2009 that number rose to 17 and to 29 in 2010. Clearly the current bankruptcy mechanism is not fit for purpose.

The Bill contains a provision for the establishment of a debt settlement office, which would licence a panel of personal insolvency trustees. These trustees would manage debt settlement arrangements and make debt relief orders. I have already had numerous inquiries about the process of becoming a personal insolvency trustee and believe that there will be a huge volume of applications for these positions. However, it is important that as this formal process replaces what was a voluntary process, the huge extra costs are not borne by already hard-pressed householders seeking to regulate their financial affairs.

The debt settlement arrangements which relate to unsecured debt only will be the key section of this legislation for many householders. Through such an arrangement, both parties will agree to an amount to be paid over a period of five years. At the end of the term, the debt will be deemed fully paid but this arrangement will only be available to a person who acts in good faith and who makes a full disclosure of all assets. People who conceal assets in this fashion will face criminal prosecution.

The issue of bankruptcy tourism has only presented itself to the Irish people in recent months, with a number of high profile business people featuring in court proceedings as various parties sought to determine the jurisdiction in which their bankruptcy proceedings should be conducted. For debtors in Ireland, the regime in the UK is infinitely easier to navigate than the current system in Ireland and allows a person to become debt free after 12 months. The European Union opposes such bankruptcy tourism and debtors can be involved in insolvency proceedings in more than one state at any time.

The Bill aims to fulfil an important element of the programme for Government and the EU-IMF programme for Ireland. Given the financial difficulties faced by thousands of people across the country and its effect on a vast section of the children growing up in Ireland today, change to the current legislation is imperative. The Minister for Justice and Equality, Deputy Shatter, has invested huge time and energy in the current Bill, the aim of which is to bring Ireland in line with other European countries in dealing with insolvency.

The Minister has also stressed the need for people in mortgage arrears to engage with their lenders and for lenders to engage constructively with customers in genuine financial difficulty. I am glad to note the Minister's statement that the protections afforded under the Central Bank code of conduct on mortgage arrears will continue to be available to co-operating borrowers. In conclusion, the Bill is a step in the right direction in modernising the Irish bankruptcy laws and in terms of putting in place a mechanism for those unable to service their debts to deal effectively with them.

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