Frances Fitzgerald (Dublin Mid West, Fine Gael) | Oireachtas source

I move: "That the Bill be now read a Second Time."

I am very pleased to introduce the Bankruptcy (Amendment) Bill to the House today and I look forward to hearing Deputies' contributions. I would like to begin by highlighting the main objectives of this Bill. First, it provides for several key changes to bankruptcy law in Ireland. These are that the normal duration of bankruptcy is reduced from three years to one year; the normal duration of a bankruptcy payment order, which concerns the payments a court may direct the bankrupt person to make towards his or her creditors, is reduced from five to three years; and a bankrupt person's legal interest in his or her home will revest in him or her after three years, subject to certain exceptions. These significant changes will ease the impact of bankruptcy on the large majority of bankruptcy cases who did not seek to go bankrupt and who have co-operated in an open manner with the bankruptcy process and handed over income and assets towards repayment of debts. In such a situation, the bankrupt person will be able to exit bankruptcy and return to normal economic activity much more quickly in line with the position in England, Wales or Northern Ireland.

Second, the Bill provides for significant sanctions to deter and penalise any bankrupt person who do not co-operate with the bankruptcy or who tries to conceal his or her income or assets from creditors. In such cases, the High Court will retain the power to extend the bankruptcy term to up to eight years and to extend the duration of a bankruptcy payment order to up to five years. In addition, a new provision will allow the High Court to extend the bankruptcy term to up to 15 years where it is satisfied that there has been particularly serious non-co-operation or concealment.

Third, the Bill modernises key aspects of bankruptcy procedures. It will abolish the outdated requirement for a statutory sitting of the court in all bankruptcy cases, provide an effective power for the official assignee to disclaim onerous properties and ensure that the official assignee has clear powers to demand and investigate electronic records relating to a bankrupt's assets and affairs. While these changes are procedural, they are nevertheless vital as they will remove unnecessary costs and delays, free up court time and resources and allow more efficient and effective bankruptcy administration. Fourth, the Bill sets out appropriate transitional arrangements so that people already in bankruptcy will also be able to avail of these reforms subject at maximum to a six-month transitional period.

Before I set out the Bill's provisions in more detail, I would like to note that the overall thinking behind the Bill has been influenced in particular by the Private Members' Bill on reducing the bankruptcy term to one year sponsored by Deputy Penrose, which was published in March this year and whose provisions have been incorporated into this Bill, and by the report on bankruptcy reform completed last summer at my request by the Joint Oireachtas Committee on Justice, Defence and Equality chaired by Deputy Stanton. I thank him for the work done by him and members of the committee. The joint committee held a public consultation and examined more than 100 submissions before providing me with its report in July which likewise recommended reducing the bankruptcy term to one year. I thank Deputy Penrose for his interest and work on this matter and once again express my appreciation to the joint committee for its detailed work and to the Joint Oireachtas Committee on Finance, Public Expenditure and Reform and the many stakeholders and individuals who made very valuable submissions.

I think Deputies will agree that this Bill represents an important milestone. It comes at the right time as it complements the significant reforms that we have already introduced since 2012, including the enactment earlier this year of the Personal Insolvency (Amendment) Act and the commencement in recent weeks of the new independent court review of the so-called "bank veto", that is, where creditors reject a personal insolvency proposal. Other recent developments include the waiver of court and Insolvency Service of Ireland fees for insolvency cases, a substantial reduction in bankruptcy costs and the putting in place a nationwide network of dedicated mortgage arrears Money Advice & Budgeting Service centres, including provision of information and support at all repossession hearings. This is happening at all repossession hearings and I urge people to avail of those services.

I will now turn to outlining the thematic provisions of this Bill. Under the Bill, the normal duration of bankruptcy will be reduced from three years to one year, as recommended by the joint committee in its report. This will also correspond to the position in England, Wales and Northern Ireland. The report of the joint committee expressed concern that reducing the bankruptcy term should not benefit bankruptcies which appeared to be deliberate or fraudulent. The Bill responds to that concern by retaining provision for a considerably longer bankruptcy term - up to eight years and, in particularly serious cases, up to 15 years - where the court is satisfied that the bankrupt is not co-operating with the bankruptcy or has tried to conceal assets or income.

Bankruptcy payment orders are court orders made on the application of the official assignee which require a bankrupt to make payments for the benefit of his or her creditors from any surplus income or assets after reasonable living expenses for the bankrupt and any dependants. The Bill will reduce the normal maximum duration of a bankruptcy payment order from five to three years. However, the maximum five-year duration will still apply in cases where the court is satisfied that the bankrupt has not co-operated with the bankruptcy or has tried to conceal assets or income.

When a person becomes bankrupt, his or her interest in any property he or she owns, including his or her home, passes automatically to the official assignee whose duty is to sell it, if feasible, to repay his or her creditors. Section 61 of the Bankruptcy Act protects any spouse or civil partner of the bankrupt by requiring the official assignee to apply to court for leave to sell the home if it is a family home under the Family Home Protection Act 1976 or a shared home under the Civil Partnership Act 2010. The official assignee will try to dispose of the bankrupt's interest in the property, preferably to the spouse or civil partner. However, in many cases and particularly where the property is in negative equity, no purchaser can be found. The Bill proposes a practical solution in such cases by providing that the bankrupt's interest in the home will automatically revest in him or her three years after the bankruptcy adjudication unless the court orders otherwise, the bankrupt and the official assignee agree otherwise or the official assignee has sold it or applied for a court order authorising sale before that date.

A similar provision already applies in England and Wales. This applies to the bankrupt's home at the date of bankruptcy adjudication, whether it is the family home, shared civil partnership home or principal private residence as a single person. This will also allow for more efficient and cost-effective administration of bankruptcy cases, particularly those with very limited resources. It is important to note that the bankrupt's interest in the home remains subject to any mortgage so the position of the mortgage lender is not affected.

The Bill introduces a new power for the court to extend the bankruptcy term up to a total of 15 years on application by the official assignee where the court considers it just to do so in cases of particularly serious non-cooperation or concealment by the bankrupt. The reason is that a relatively small number of bankruptcy cases feature particularly serious and flagrant levels of such conduct by the bankrupt, for which there is currently no adequate deterrent.

The new 15 year maximum term is modelled on the approach in the US and UK. In the US, a bankrupt's debts are only discharged if he or she has cooperated with the bankruptcy trustee, equivalent to our official assignee. In the UK, legislation allows the bankrupt to remain subject to continuing bankruptcy restrictions for up to 15 years in case of non-cooperation, a "bankruptcy restriction order".

The Bill will abolish the requirement under the Bankruptcy Act to hold a "statutory sitting" of the court in every bankruptcy case, some weeks after adjudication, which must be attended by the bankrupt, the creditors and the official assignee. The original purposes of the statutory sitting are now superseded and it is widely seen as an outdated formality which creates unnecessary legal costs and workload for debtors, creditors and the official assignee, and is a major strain on court bankruptcy resources. Its abolition will free up considerable time for the courts and the official assignee and will also benefit the parties.

The Bill will clarify the wording of several provisions in the Bankruptcy Act to put it beyond doubt that electronic as well as paper records are covered by the powers of the court or the official assignee to demand accounts and records for the purposes of investigating a bankrupt's affairs. This arises in only a few high-asset cases but is important to assist the official assignee in investigations where a bankrupt may have concealed assets.

The Bill will allow the official assignee an effective power to refuse to accept responsibility for any property of the bankrupt which is likely to generate substantial costs and where there are no funds in the bankruptcy estate to cover these costs. This is an important provision. When the official assignee takes over a bankrupt's property, he becomes legally responsible for any costs and liabilities arising from it. These may include unpaid rates, property tax, management charges, essential repairs, ongoing security and insurance of properties which may not be generating any revenue. At the same time, the official assignee has no power to compel any contribution from the secured lender who is entitled to receive any proceeds of sale of the properties. Consequently, these costs risk being imposed on the State and the taxpayer.

The current provision for disclaimer in the Bankruptcy Act effectively only applies to liabilities arising under a lease, which does not cover the many sorts of liability I have mentioned. In the UK this problem has been addressed by the Insolvency Act 1986, which gives the official assignee a broad power to disclaim any onerous property, meaning that such costs are, more appropriately, the responsibility of the secured creditor who will receive the benefit of the property concerned. The proposed amendment in this Bill follows the same approach and will generate considerable savings for the State and the taxpayer as well as improving the efficiency of bankruptcy administration.

Any bankruptcy already existing when the Bill comes into effect will also benefit from the changes introduced by this Bill subject to a six-month transitional period. This reflects the six month transition period provided previously when the bankruptcy term was reduced from 12 years to three years by the Personal Insolvency Act 2012. It is needed to ensure sufficient time is available to ensure a smooth transition and to make any necessary applications to court for extension of time in cases which raise possible issues of non-cooperation or attempted concealment.

Under the transitional provisions, and assuming that there are no grounds for extension, an existing bankruptcy, which was due to terminate three years after adjudication, if it is already due to terminate less than six months after the commencement date will terminate on its due date, otherwise it will now terminate one year after adjudication or six months after commencement if that is the later date; an existing bankruptcy payment order which was due to expire five years after it was made by the court, if it is already due to expire less than six months after the commencement date will terminate on its due date, otherwise it will now expire three years after it was made or six months after commencement if that is a later date.

The provision for re-vesting of the bankrupt's interest in the family home applies to a bankruptcy which exists at the date the Bill comes into effect. Re-vesting takes place, subject to the usual exceptions, either on the third anniversary of adjudication or six months after the commencement date, whichever is the later.

The technical content and effect of each section in the Bill is set out in the Explanatory Memorandum. Sections 3 to 5 deal with the "statutory sitting", and sections 6 and 7 relate to electronic records as I have explained. Section 8 is an important provision, which amends section 56 of the Bankruptcy Act to ensure that the official assignee has a strong and effective power to disclaim property of a bankrupt which is subject to costly liabilities. Section 9 deals with issues regarding the family home. Section 10 is another important provision which amends section 85 of the Bankruptcy Act 1988 to provide for two of the main purposes of the Bill, reduction of the bankruptcy term and re-vesting of the bankrupt person's home. Subsection 10(a) reduces the normal duration of bankruptcy from three years to one year and provides transitional arrangements for bankruptcies already in existence at the commencement of this section. Subsection 10(b) concerns the re-vesting. Section 85(3F) is a transitional provision which I have detailed. Section 11 deals with the extension of time when somebody does not cooperate. Section 12 reduces the normal duration of a bankruptcy payment order. Electronic records are also dealt with in section 15.

In conclusion the background of our economic crisis means that many of those now entering bankruptcy, or already in bankruptcy, have been struggling with intractable debt for several years. The measures in this Bill will give people in serious debt who have no disposable income an earlier return to normal economic activity. As the Small Firms Association has underlined they will particularly help small entrepreneurs. At the same time the Bill includes strong provisions to ensure that any bankrupt who tries to conceal resources from creditors or evade their obligations will end up with a longer bankruptcy term and a longer bankruptcy payment order. It also makes important changes to modernise bankruptcy procedures, reduce unnecessary costs and ensure that the official assignee has effective powers to focus on the small minority of bankrupts where there may be issues of fraud and concealment.

This Bill provides a further example of this Government's commitment to bringing forward practical reforms to ensure a more enlightened, less punitive, less costly approach to help people struggling with debt to return to solvency. I commend the Bill to the House.

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