Thursday, 17 December 2015
Bankruptcy (Amendment) Bill 2015: Second Stage
I welcome this legislation and, in particular, pay tribute to my colleague, Deputy Willie Penrose, who personally and unrelentingly championed this legislation. There are significant benefits to be gained from these changes to the bankruptcy laws, not least that on the island of Ireland there will be one period for bankruptcy. We will not have what can be loosely termed as bankruptcy tourism for certain people who can afford to avail of it.
Many decent people, particularly those in small businesses, put everything on the line. In certain circumstances, unfortunately, they put their family home on the line as well as their other assets to secure their businesses. However, some have found themselves in a position where they have, unfortunately, had to go down the route of insolvency and bankruptcy. Ireland is notoriously a country where the level of debt repayment is exceptionally high. The level of default on mortgages, historically, was especially low. Irish people are noted for paying their debts. We are not a country where people enter into debt or default on debt lightly. It is right and proper that we have taken the bankruptcy and insolvency process to a point where it will work.
Unfortunately, as has been mentioned, this has been slow in coming. The legislation introducing the insolvency process initially was not as effective as it had been hoped. Unfortunately, it took some time to bed down. The changes this Bill will make to the insolvency legislation are welcome. It is a case that more needs to be done, however, particularly when we look at the ongoing situation with mortgage arrears. It is improving in that we have gone from 90,000 cases of mortgages in arrears of more than 90 days in 2014 down to 70,000 cases. What is more disturbing, however, is the significant number of cases in arrears for more than two years, somewhere in the region of 38,000 cases, while 26,000 cases are deemed to be intractable. In other words, we have a long way to go in resolving the situation with mortgage arrears.
The high level of personal debt in Ireland today has been recognised by the European Commission and which will very much be a drag factor for our economy. No one would argue that what has happened in this country over the past decade has not been short of a disaster. It is appropriate that we find a way now to enable people to move on and get their lives back on track. Reducing the period of bankruptcy to one year is a positive and important step in this regard, but we need to consider additional changes. While we have put in the provision that, in theory, allows the Circuit Court to look at an insolvency proposal that has been refused, the difficulty arises in a situation where there is only one class of creditor.Unfortunately, if all creditors refuse the case cannot be reviewed by the Circuit Court. Therefore, we must change the insolvency legislation to allow for a review by the Circuit Court where there is only one creditor. I am personally dealing with a situation at the moment where the individual concerned has all of the debt with one lender. Therefore, the person cannot avail of the insolvency process because the lender has refused to consider an arrangement.
I accept that there are protections in the legislation for scenarios where borrowers hide assets. I believe it is right and proper to have such protections because I do not think that the people need or want to pay for fraud. There is evidence, in certain circumstances, that people have not been entirely truthful about their level of assets. I do not suggest for a moment that this relates to many people because the vast majority of ordinary people have done their absolute best to declare their assets. It is right and proper that the legislation contains safeguards to deal with people who are not open and forthcoming.
I wish to bring to the Minister of State's attention the report compiled by the Oireachtas Joint Committee on Finance, Public Expenditure and Reform on mortgage arrears and a resolution process. A certain number of the proposals in the report need to be considered, particularly in terms of some of the earlier stages of the debt process. In an ideal world bankruptcy should be avoided at all costs. Bankruptcy is not pleasant. The fact remains that most people who have found themselves in a bankrupt situation will never really be able to borrow again. They will also find it enormously difficult to establish businesses and so forth. Therefore, we should ensure that as many people as possible never find themselves in that situation. The report contains a significant number of recommendations that would ensure that more cases are resolved at an earlier point. One of the advantages of reducing the period of bankruptcy will be to ensure that more lenders engage in the process at an earlier stage. Quite clearly, if somebody is declared bankrupt then the lender will ultimately lose out. I accept and acknowledge that an impetus definitely exists.
Other measures need to be considered. In particular, when a lender makes an offer to a borrower in terms of deciding whether a mortgage is sustainable, offers a split mortgage or some other arrangement such as extending the term, there is no independent appeals process for somebody at that stage of the process to submit an application. Therefore, the lender acts as judge and jury over the borrower. We should very much consider looking at the earlier stages of the process. We must also ensure that bankruptcy is always the last resort and that everything that can be dealt with at an earlier stage is dealt with.
I welcome the new role for the Money Advice & Budgeting Service, MABS. One of the difficulties for people is the cost of representation. It has been my experience, as I am sure it has been the experience of many people in this Chamber who have had to deal with people in this situation, that such people have reached the end of their tether as they are without resources. They do not have the resources to engage with personal insolvency practitioners and they do not have money for court representation. It is very important to have a level playing field for the borrower and lender. Without question or doubt, resources should never be an issue for a borrower engaging with a lending institution. We have been a little too slow in coming to the table to try to level the playing field. I ask the Minister to ensure that MABS is properly resourced not just in terms of money but in terms of having people with the expertise to negotiate directly with lenders. Also, we must ensure that people are represented at the court process stage.
To conclude, I welcome the legislation before us. Again, I commend our colleague, Deputy Willie Penrose, and thank him for what he has done. There are many indebted people in this country today who will be very grateful to him for what he has done.