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

Amendment No. 2 seeks to rewrite provisions in the Personal Insolvency Act, which is not the purpose of this Bill. The House should be aware that the protection to mortgage proposed by this Bill is to require the court to allow for a personal insolvency regime to be considered where, for example, none previously had been attempted, as with the requirement now in bankruptcy petitions, not that the court should direct first to a new personal insolvency arrangement and effectively determine its outcome, as is suggested in this amendment. Once the PIA proposal has been rejected by the creditors' meeting and no subsequent proposal is made during the protective certificate period, the personal insolvency practitioner's role as a mediator and negotiator for the debtor ends. It should also be noted, however, that where a proposal is rejected at a creditors' meeting and where the protective certificate period is still extant, this does not stop a personal insolvency practitioner from making a different proposal that creditors might accept. Therefore, once a proposal has been rejected and where there is no other proposal that can properly be made within the timeframe, the personal insolvency practitioner has no standing whatsoever in the repossession process and the law does not provide for the court to appoint him or her as an officer essentially to force a settlement on creditors, as such a practitioner cannot do that.

The amendment ignores the fact that the personal insolvency legislation is designed to allow agreed settlements to be reached as an alternative to court-ordered settlements. This amendment would overturn this carefully calibrated approach. In addition, the proposed provision that a proposal should only offer to repay the current value of a property would represent a huge interference in commercial contractual and property rights and is likely to be subject to swift challenge in the courts. Furthermore, it makes no reference to the repayment capacity of the debtor, which it appears essentially would be determined by the current value of the property. This would have obvious negative consequences for banks, other financial institutions and ultimately taxpayers in the country. The amendment could encourage delinquent behaviour on the part of all debtors, nearly 90% of whom are repaying their mortgages in order to get their mortgages reduced to present value. This would result in a serious risk of complete collapse in the property market and would threaten the solvency of the financial institutions and of the economy. In case there is any misunderstanding, I do not look favourably on the amendment.

Finally, this amendment would run the risk of turning every proposal for a PIA into a costly preliminary to repossession proceedings. I am conscious of the contributions all Senators have made, but they essentially are about reopening a debate we had on the insolvency legislation, and I will not do that. That legislation is now in place and is about to be implemented. Let us see how it works in practice. I reiterate what I said in this House and elsewhere previously - that, should there prove to be difficulties, we will address them if necessary.

I remind Senators that the provision in this Bill has the added value of seeking to encourage financial institutions to engage with debtors where there is some realistic prospect of matters being resolved and where the financial circumstances of the debtor give rise to a reasonable possibility of a personal insolvency arrangement. If a financial institution fails to do so, for example, and takes repossession proceedings, section 2(3)(d) is of importance. In considering how to proceed and whether to ultimately order repossession or whether to adjourn proceedings, one of the issues the court must have regard to is, as Senator Hayden mentioned, the conduct of the parties to the mortgage in any attempt to find a resolution to dealing with the arrears of payment due on foot of the mortgage. Without the enactment of this legislation there have already been cases in which the courts have adjourned repossession proceedings and encouraged parties, including financial institutions, to engage to resolve issues in which it looked as if there was a practical possibility of financial issues being resolved without the need for the court to make a repossession order.

Clearly, if a person who owned a family home was in financial difficulties and a repossession application was made to the court, and if it was clear that the person had funds out of which mortgage repayments could be made that were reasonable and realistic in the current environment, and the financial institution had refused entirely to engage with the person, under that provision it is inevitable that the court would adjourn the proceedings and would not grant repossession, and the financial institution would be required to engage. It would not be required to reach agreement but it would be required to engage, and the essence of engagement is that there is ultimately an agreed solution. If there is not, somebody in financial difficulties has another remedy, which I will not go into now because I do not wish to turn the debate on this Bill into a reopening of every section of the insolvency legislation.