Tony McLoughlin (Sligo-North Leitrim, Fine Gael)

Deputies have been waiting for this Bill for some time, mainly because the debris of the economic collapse is all around us, but most especially in the lives of our citizens who have seen a dramatic fall in the value of their fixed assets, such as homes and businesses. The value of homes has reduced, according to various reports, by up to 61% since 2008. In some cases, the fall has been greater when there is a very cautious bank policy on lending. In many cases, the real value of many properties is far less than the value of the remaining mortgage.

Business premises, industrial units, office blocks, hotels, pubs and restaurants have devalued beyond belief. Many business people secured huge loans with personal guarantees and are now directly in the firing line and face ruin. I welcome this Bill for the reasons already mentioned and, specifically, the proposed measures to reform insolvency law personal and the introduction of the following non-judicial debt resolution processes subject to relevant conditions in each case. The first is a debt relief notice to allow for a write-off of qualified unsecured debt up to €20,000, subject to a three-year supervision period. The second is a debt settlement arrangement for the agreed settlement of unsecured debt and the third is a personal insolvency arrangement for the agreed settlement of secured debt up to €3 million and unsecured debt. The Bill also reformed the Bankruptcy Act 1988, which will include the introduction of automatic discharge from bankruptcy, subject to certain conditions, after three years instead of the current 12 years. The 1988 Act is a farce and the number of people who have explored the possibility of moving to the UK and benefiting from bankruptcy rules in that jurisdiction is startlingly large. As a Deputy, I have been consulted by many constituents who have nowhere to turn but to the UK. Our laws on the issue must at all times be compared to the UK. I welcome the Government initiative.

A debt relief notice remains in effect for a period of three years from the date it is recorded in the register of debt relief notices. The time period is not set in stone as an extension may be granted by the court on application by the insolvency service in specific situations. There will also be a system of debt settlement arrangements between debtors and one or more creditors to repay unsecured debt over a period of five years, with a possible agreed extension to six years. The debt settlement arrangements will assist persons with incomes, assets or debts that fall outside the criteria of the debt relief notice. The Bill makes a number of amendments to the Bankruptcy Act 1988, including an increase in the minimum amount for a creditor petitioned for bankruptcy from €1,900 to €20,000. I welcome the modernisation of our bankruptcy laws, which bring them in line with our European neighbours.

Compromise is the name of the game and I have no doubt disputing parties will have workable debt resolution processes and it will encourage lenders and borrowers to resolve debt issues. It is estimated that more than 10,000 home owners are in real difficulty and will never be able to pay for their homes. Beyond that, 50,000 will find a resolution through negotiation and interaction with lenders. However, in some cases this mechanism will not suffice. Many Members know households where both parties worked in construction or related commercial activities and now receive social protection payments as income, with a mortgage up to €1,500 per month. The value of the house may be €150,000 while the mortgage is somewhere near €300,000. In such cases, we have a problem and that is where the new Bill can assist. Such people are, technically, insolvent and, with the bank's agreement, they can sell the home and outstanding debt can be written off after six years. The mortgage holder will contribute something over six years to pay off the debt but will still maintain an adequate standard of living. Banks may agree to such arrangements as it removes a non-performing loan from the book and arrears are no longer building up.

In most cases, especially if the individual is unemployed and has little prospect of regaining employment, almost no level of mortgage debt is sustainable irrespective of the value of the property. In such cases, it is unrealistic that creditors will agree to a write-down to a sustainable level, if they see it is less than the current level of the value of the property. Their duties to their shareholders prevent them from doing so. There is also the possibility that many of the home owners in difficulty can keep their homes under the personal insolvency arrangements and will have their debt written down to a sustainable amount. This figure may not be the value of the home and could be a lot more but it must be sustainable and the person must be comfortable with the commitment. In this case, I hope the banks will only agree to it where the home owner in difficulty has an income other than social welfare system and that the mortgage arrears resolution process has failed to make the current level of the mortgage sustainable.

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