John O'Mahony (Mayo, Fine Gael) | Oireachtas source

I am glad to make a contribution to this debate. I welcome the main thrust of the Bill which is to reduce the period of discharge for bankruptcy from three years to one. I commend Deputy Willie Penrose who has pursued this issue relentlessly in the past few months and also the valuable contribution of the Joint Committee on Justice, Defence and Equality which is chaired by Deputy David Stanton. I also commend the Minister for Finance for listening to what needed to be done and bringing the Bill to the floor of the House. It will bring Ireland into line with many other countries and provides for enough checks and balances to allow those who are totally overburdened by debt to see some light at the end of the tunnel. At the same time it provides for extended bankruptcy and bankruptcy payment orders where someone is unco-operative or fraudulent. It will give a break to those who are genuinely trying to make a new start and has the capacity to increase the sanctions for those who fail to co-operate. It will also abolish the statutory setting whereby a bankrupt person was obliged to attend court after the adjudication of bankruptcy. Many saw this as a public humiliation. The net effect will be to allow more families to stay in the family home.

I have illustrated some of the positive outcomes that will flow from the passing of the Bill. However, there are a number of anomalies for those who have taken the bankruptcy route under the old system. I have spoken to a person who has been in the bankruptcy process for five months and will have an 18-month term with three years income payments. This, effectively, only reduces his term by six months and he believes he is being penalised for being courageous enough to take the bankruptcy route before the term was reduced. Under the Personal Insolvency Act 2012, the ceiling for the debt relief notice has been increased to €35,000 in recent times, but the criteria for access to debt relief notices are too restrictive. MABS deals with people in this category. If one has disposable income of more than €60, assets worth more than €400 or a car with a value greater than €2,000, one is not eligible. These thresholds need to be looked at urgently and increased. Only 500 debt settlement arrangements were made in 2015, which is too low and strongly suggests banks are vetoing many proposed settlements. Some 65% of creditors have to approve the settlement. This figure needs to be looked at again or banks will continue to have a veto. I welcome the commencement in recent weeks of independent court reviews of the so-called bank veto which allows creditors to reject a personal insolvency proposal. That issue is being looked at and not before time.

Insolvency was the result of financial madness, not only on the part of consumers but also because of reckless lending. When the legislation to deal with insolvency was introduced, it was at a time when the banks were insolvent and loss-making. The legislation was balanced in favour of the banks, which is no longer the case. There has been substantial recovery in property prices, but it has been confined mainly to urban areas. Provincial Ireland still has a long way to go to catch up. Banks lent vast sums of money on an interest-only basis to individuals on the basis of providing security only to purchase rental property. Unless a financial institution can prove it established the capacity of the borrower to service the debt over a 25-year period and by the age of 70 years, the borrower should be given the option of selling the property and repaying the bank with the proceeds. In such a case, a large percentage of any shortfall should be written off by the bank as it was clearly caused by poor lending practice.

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