Alan Shatter (Dublin South, Fine Gael) | Oireachtas source

Amendments Nos. 10 and 11 seek to raise the limit for the aggregate of qualifying debt under a debt relief notice from €20,000 to either €30,000 or €50,000. I accept that these proposals are well intentioned, but they fail, unfortunately, to recognise the nature of a debt relief notice. The latter is designed to assist debtors with essentially no income or assets and with a level of qualifying debt up to €20,000.

This is a substantial level of debt to be forgiven. It is effectively debt forgiveness aimed at writing off a substantial amount of money. The sum of €20,000 is a substantial amount of money.

The proposed measure provides a non-judicial, low-cost solution to the debt problems of persons who have minimal assets and minimal income. It seeks to offer these people relief from what may be crushing debt burdens, as well as providing them with real hope for the future and encouraging full participation by them in the economy. It seeks effectively to provide an alternative to a judicial bankruptcy for people with a certain level of unsecured debt. As Deputy MacLochlainn rightly points out, it is at a level whereby one does not need to resort to one of the other debt resolution proposals that we have, particularly the debt settlement arrangement which he mentioned.

It is important that we fix the qualifying debt level at a figure which meets the genuine needs of individuals but does not encourage people to engage in abuse when money is genuinely owed to creditors. In this debate we have to remember that creditors can be ordinary people who are also trying to meet their financial obligations, while struggling to keep their families together, and are in difficulty because debtors owe them money for simple, basic services they have provided. So the measure is designed to ensure that there is some degree of balance in this area and not to encourage people to incur debt to the disadvantage of others in circumstances where they believe they will simply get a large amount of debt written off.

I have cited examples previously whereby the debt could involve a local shop that is owed a couple of thousand euro, or a local credit union that might be owed €4,000 or €5,000. We must ensure that we do not create a system that encourages people to build up substantial debt. Sums such as €30,000, €40,000 or €50,000 are substantial so we cannot encourage people to build up such debts with the expectation that all they have to do is establish that they do not have the money and it will simply be written off.

We all know there are people who have incurred debts of €10,000 or €15,000 and MABS has been dealing with them. They always intended to pay off their debts but their personal financial circumstances have been unexpectedly impacted upon by circumstances. During the course of the great economic difficulties we have had over the last four years, individuals who believed themselves to be in secure employment suddenly found themselves unemployed. Some individuals - such as a local painter, electrician or plumber - may have done work for others, perhaps assisting people in renovating homes. They may be owed money after doing many weeks of work but suddenly discover they cannot get paid. This is happening to a far greater extent than has ever been the case. We cannot, however, encourage people to incur massive debts or, by refusing payment, leave high and dry those who in good faith have provided products and services.

We considered, therefore, that an upper level was appropriate to the debt relief notice. As I said on Second and Committee Stages, what we have proposed is higher than the equivalent in Northern Ireland and Britain. In the UK, a similar process provides for an upper debt limit of £15,000 which is less than €20,000 at today's conversion rate. However, it is not just a case of being generous in this context, in so far as we have provided for a sum of €20,000 which is a little bit more than the UK equivalent. It is also trying to make a practical judgment as to what the appropriate levels are. No unique judgment can be made in this regard. As we have gone through this legislation, I have said that in this area there is no monopoly of wisdom, so a judgment has to be made. We believe that €20,000 - as the debt qualification eligibility for falling within the mechanism of the debt relief notice - is a balanced and reasonable sum that delimits individuals from thinking they can head down the route of spending €30,000, €40,000 or €50,000 and then get it written off. It provides a simple mechanism for people with very limited income and assets. It is also in line with the type of arrangements that MABS has been able to organise for individuals without the legislation being in existence. In my experience, a MABS arrangement normally - except in exceptional circumstances - involves some levels of repayment taking place.

I understand the arguments that have been made and I am conscious of what FLAC has said about this matter. However, we consider that the €20,000 limit is the appropriate one. Deputy Donnelly asked if we could gauge how many additional people might be covered if we went from €20,000 to €30,000. It would be an absolute guesstimate. I do not think that any of us in this House can, hand on heart, say for sure that we know the answer to that. However, we must also look at the experience of neighbouring jurisdictions. I think it is reasonable to set it at €20,000. The sum of €50,000 would be far too high. I understand the argument that FLAC is making but our judgment is that this is a fair proposal. It gives the possibility of debt write-off to people of limited income and assets. In certain circumstances it may have a detrimental impact on creditors but the impact is not as great as it would be if, for example, the limit was €30,000 or €40,000. When we get into those limits it is reasonable that the debt settlement arrangement is available. If individuals are in a position to be able to make some contribution to discharge their debts over a period, it is quite reasonable to use the debt settlement arrangement rather than expecting to enter into an arrangement where one has incurred that level of debt and one is substantially guaranteed debt forgiveness, unless there is a dramatic change in one's circumstances during the period of the debt relief notice. In the latter case, matters may be readjusted at one's own request so that one pays off some portion of money to creditors and exits one's circumstances. We think, however, that this is a reasonable level to pitch it at, and I hope the House will support that.

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