Catherine Murphy (Kildare North, Social Democrats) | Oireachtas source

I support the Bill. I do not suppose anybody in this House will say they welcome the fact that we are talking about bankruptcy, several years after the crash, but this is an important initiative. However, much more is needed. It is extraordinary that moral hazard did not extend to some of the very large debtors in this country that are visibly back in action without having to go through bankruptcy because a different approach was taken depending on the scale of the debts. Moral hazard appears to be for the little people.

Many people who got into debt did so because they took risks based on a false premise in the early years of the noughties. Many businesses took extra credit to upscale and then found when the economy fell off a cliff that the payments could not be sustained. I spoke to one business person who told me the bank called the company in to talk about how it might put the business back on track. The bank insisted on getting in an expert to examine the technical arrangements that might improve the income of the business. The individual was forced to spend €12,000 on that process. A number of initiatives were identified to improve the business but when the individual went to the bank they were told the bank would not provide funding. The way back is the problem for many people. In the case I outlined the business is just about keeping its head above water but the bank was not there to help and support it to grow out of trouble.

I welcome the fact that the same bankruptcy regime now applies both North and South. The time difference was important. It was offensive to see people availing of the opportunity where they could, going to England, Wales and other places where a different regime prevailed.

The main area on which I wish to focus is mortgage arrears. Approximately 350,000 men, women and children in families in the country are in mortgage arrears and approximately 55,000 of those are in arrears for more than two years. That does not account for local authority housing arrears, which are also sizeable. Mortgage arrears in this country are out of kilter with the rest of the European Union, including countries such as Spain, Greece and Portugal. In part, that has to do with the only options that are available for people to house themselves. Traditionally, people only had two options; first, to get a mortgage and buy a house and, second, to go on a housing waiting list. Housing waiting lists have been growing in recent decades so that has not been an option for many, and the option of renting in the private sector has come to the fore as a consequence. Ironically, it is the least secure and most expensive form of housing at the moment.

What is needed, in addition to a one year bankruptcy for those who, unfortunately, find themselves in that position, because it is not an easy process for anyone, is more than just that – we need a higher level of intervention if we are to get to the endgame for the families that are affected. What is necessary is to create a one-stop-shop for borrowers in distress that is free at the point of use and provides expert financial and legal advice and representation. The last thing people in debt need is to be told to pay for advice. They are the very people who cannot afford it. Among the measures we advocate is to equip the courts to refuse possession orders based on the sustainability of the proposed restructure, mandating a set of restructuring options to be considered in all cases and improving access to the mortgage to rent scheme. Having been involved in a small number of such cases, it is like pulling hen’s teeth to try to get them over the line. One could spend eight or nine months with a family engaged in very dedicated work trying to get it across the line, which is very difficult. We must increase the sustainability of restructures by redefining them to include consideration of the total debts, including residual debt and payments post-retirement. Many people in the pre-crash era took out mortgages at a later point in their life than they would otherwise have done. When their income was reduced, the prospect of going into retirement with a reduced income becomes problematic where there is no prospect of additional income.

The reality is that one way or another there will be a cost to the State. There were seven families in the courts yesterday facing repossession orders. That happens on a daily basis in the courts in each county. Some cases are at the end of the process while other people are involved in one hearing after another until they reach the point of no return if their mortgage is not sustainable and other options are not brought into play. By definition, when a family is made homeless due to repossession they will be quite impoverished anyway or else they would have been paying the mortgage in order to avoid repossession. Most likely, they will end up getting rent assistance. In my area, rent assistance is way below the market rent but negotiations take place in order to prevent people becoming homeless. The typical amount provided in rent assistance is approximately €1,300 a month. Such families go on a housing list and if the HAP arrangement is in place, they can work, but if it is not they cannot work. It is stupid not to count the cost of stress because if people do not function optimally one takes away their ability to go back to work and thrive as individuals or as a family. That is an important element of what needs to be done. A more comprehensive arrangement must be put in place, in particular for those in mortgage debt because on its own the bankruptcy will not resolve the crisis.

The Oireachtas Joint Committee on Finance, Public Expenditure and Reform listed six principles in terms of dealing with the mortgage crisis. They were transparency, sustainability, dignity, equity, protection of Exchequer funds and stimulation of economic growth. Protection of Exchequer funds means that one does not count the cost, for example, of housing somebody if they end up losing the family home or becoming bankrupt because they will require to be assisted by the State.

In terms of respecting dignity, some of the pressures imposed on home owners by the lending institutions, with respect to their constant rounds of demands, have practically broken home owners' spirits. Home owners participating in the money arrears resolution process, MARP, got respite, to some degree, from the constant chasing by the banks where those home owners were under pressure and could not meet the costs involved but that is not a principle that was followed by some banks.

With respect to the sustainability aspect, all of a person's debts must be taken into account rather than, for example, only the mortgage issue. The totality of people's debts must be examined to ascertain how they can be helped to get to a point where they can have a sustainable future.

This is important legislation and I welcome that it is being taken today. It was initiated, as a Private Members' Bill, by Deputy Willie Penrose. I echo Deputy Mac Lochlainn's point regarding other legislation. I introduced a planning Bill, which I considered to be reasonable legislation. It was not opposed by the Government and was referred to a committee, of which I am a member. I was persuaded to take that Bill off the agenda on the basis that some of the issues in it would be included in planning legislation to be introduced at a future date. Not one further i was dotted nor t was crossed in that legislation following its referral to the committee. That was a waste of everybody's time. The Government either takes a Bill forward or it does not. It would be interesting if an analysis was carried out of the Private Members' Bills that have been put forward, into the preparation of which Members have devoted much time. Those Bills often contain very good ideas - I am not referring particularly to my Bill - that have not been picked up.

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