Joe Costello (Dublin Central, Labour)

I am delighted to speak on the Personal Insolvency Bill 2012. It represents a significant step forward in our efforts to deal with personal debts. The financial turmoil in recent years has resulted in too many people facing debts they are never likely to be able to repay. Most people are agreed that the existing legislation is draconian and offers little opportunity for people to escape these crushing debts. I very much welcome the introduction of this legislation which will provide a comprehensive reform of insolvency law and offer new and more flexible options to address the circumstances of insolvent debtors.

It is important to say a few words about the context for this legislation. Over the past number of years, we have spent much time dealing with the fallout from what were described as the glory years of the Celtic tiger. It was a very brutal animal and left a huge trail of destruction behind it and we have been picking up the pieces ever since. There is no doubt that it caused more damage than good.

It was good to note today the improvement in the Slate's finances and the fact that in 2011, the economy improved from the expected growth of 0.7% to 1.4%, double what was expected. We hope that continues into the future. However, the troika - the EU, IMF and ECB - is in town. It is completing the seventh examination of whether we are dealing with our finances in an adequate fashion, of how we are dealing with our debts, our banking debts and our mortgage arrears, of the economy and of whether the fairly harsh road on which we have had to embark is being trodden on carefully and diligently.

This is all about people's lives which have been damaged and destroyed in one way or another and about people who are in arrears with their mortgages, those who are unemployed and whose income has dropped considerably. We have been seeking to put in place the necessary policies and legislation to address the matter. I hope we are coming close to putting the final piece of the jigsaw in place to deal with the problems caused by the madness which the Celtic tiger instilled in the country - the expectation it would go on forever or that there would be a soft landing. The then Minister for Finance said the bank guarantee introduced in 2008 would be shortest bailout in the history of the world and not just of Ireland.

This Bill deals with personal debt, personal insolvency and bankruptcy. This major reform of our personal insolvency and bankruptcy laws forms one part of a series of steps which the Government is taking to deal with the problem of unsustainable mortgage and personal debt which affects households and acts as a drag on the economy. The steps taken by the Government to assist with mortgage debt include increasing mortgage interest relief for people who bought their first home at the peak of the boom, fast-tracking personal bankruptcy reform to bring us into line with the best international standards and directing mortgage providers in receipt of State support to present the Government with plans for cost cutting.

Furthermore the Government introduced the mortgage-to-rent scheme to assist people whose mortgage debts are unsustainable to stay in their homes. The Minister might look into a case I have been dealing with. The mortgage-to-rent scheme seemed to be the ideal solution to the problem but it transpired that the cut-off point was €200,000 for qualification for the scheme. The value of the home of the man in question, with a wife and three children, was valued at more than €200,000 and, therefore, he could not avail of the mortgage-to-rent scheme. That ceiling might, in some way, be adjustable. Will the Minister look at that carefully to see how this scheme, which has been of value to a number of people, might be extended to this person and to others who might be deemed to be in the same situation?

The Keane report of October 2011 recommended that the early introduction of new judicial and non-judicial bankruptcy options was vital. It stated that without effective bankruptcy legislation, the mortgage arrears problem would not be resolved. This is, in many ways, the final implementation of the recommendations that were made in the Keane report. I am delighted that at last they are being addressed. The reform of personal insolvency law contained in the Bill involves the introduction of the following new non-judicial debt resolution processes - a debt relief notice to allow for the write-off of a qualifying debt of up to €20,000, subject to a supervision period, a debt settlement arrangement for the agreed settlement of unsecured debt over five years, and a personal insolvency arrangement for the agreed settlement of secured debt up to €3 million and unsecured debt over six years.

Finally, the significant reform of the Bankruptcy Act 1988 that was begun in the Civil Law (Miscellaneous Provisions) Act 2011 is continued. A significant measure is the introduction of automatic discharge from bankruptcy after three years, as opposed to the existing12 years. This development moves Ireland to the European norm for such discharge and is most welcome. It is a better period than the one year which is the norm in our neighbouring jurisdiction. It provides the correct balance.

The Bill aims to provide a modern insolvency process that addresses the obligations of debtors and the rights of creditors in a proportionate and balanced way, taking into account the financial reality of an individual's true circumstances.

These new personal insolvency laws, in addition to providing new legal remedies, should give a significant incentive for financial institutions to develop and implement realistic agreements to resolve debt issues with their customers. The provisions relating to a personal insolvency arrangement are specifically designed to facilitate a debtor's continued ownership and occupation of his or her home unless the debtor does not wish to do so or the cost of the debtor's continuing to reside there is disproportionately large. If it is not possible to come to a non-judicial debt settlement between debtors and creditors there is still the option of debt enforcement or judicial bankruptcy.

The Bill will be welcomed by mortgage holders and those with personal debt as a means of resolving what seemed like an insoluble problem. I would like to have seen the legislation on the Statute Book before now, but the steps taken to date have all been taken with a view to reaching a solution to the crisis that has befallen us in recent years. Solid steps have been taken in the right direction.

The Bill brings us almost to the end of the road of solving the problem of those who are unable to meet the debts they have incurred and must find a way forward for their families. The economy will benefit substantially by this drawing of a line in the sand. People who want to do their best to make ends meet, to get on with their lives and to build a society in Ireland are now in a position to do so.

See this speech in context