Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

While, as the Deputy states, this issue falls within the functional responsibility of my colleague, the Minister for Justice and Equality, Deputy Fitzgerald, he will be aware that the duration of bankruptcy was reduced from 12 years to three in December 2013. Insolvency Service of Ireland data indicate that for all of 2013, 58 people were adjudicated bankrupt by the High Court, whereas in 2014 the number adjudicated bankrupt rose to 448.

It can be anticipated that this number will continue to increase in 2015. This demonstrates that the reduction in the bankruptcy term is having a positive impact as a mechanism of last resort in dealing with distressed debt situations. However, more time is needed to assess the effectiveness of this measure. Recently, there have been calls in the media to reduce the bankruptcy term down to one year, with the rationalisation that this will allow entrepreneurs to regularise their debt situation quickly with a view to facilitating them in establishing a new business. Alternatively, it is suggested that reducing the bankruptcy term will enable individuals to write down debt without having to leave their family home.

Bankruptcy is a big step for borrowers and one that may not deliver the desired result of retaining the family home. It is my understanding that of those who had a family home and were declared bankrupt in 2014, approximately 70% have lost or are expected to lose their home. Banks are the best protected creditors in bankruptcy.

Currently there is a lack of analysis of unintended consequences around further reducing the bankruptcy term to one year. I would be concerned that if we act in haste on this issue, without having conducted rigorous analysis of the objectives and impacts of such a change, we may not achieve the best outcomes for entrepreneurs or private individuals.

When this analysis has been completed, the Government will then have all the facts on likely consequences, both good and bad, and will be in a better position to make an informed decision on whether the bankruptcy term should be reduced from three years to one year.

Additional information not given on the floor of the House.

The Deputy may rest assured that tackling mortgage arrears is a priority for the Government. A whole-of-Government approach has been adopted in addressing the issue with a view to maximising the level of loan restructuring arrangements and minimising the number of home repossessions. Initiatives such as the reform of personal insolvency legislation and the establishment of the Insolvency Service of Ireland, the introduction of a mortgage arrears information and advice helpline, and the availability of the mortgage-to-rent scheme, ensure that borrowers are assisted in dealing with their arrears.

Significant progress was made in 2014 in restructuring mortgage accounts. Data compiled by the Central Bank on residential mortgage arrears show that the number of PDH mortgage accounts of greater than 90 days is declining. This is, however, an area that remains under continuous review. More and concerted action is required from banks to assist and restructure customers in arrears and, as the Taoiseach has previously announced, my Department is considering a range of options to support the existing framework and improve the uptake of personal insolvency solutions.

See this speech in context