James Browne (Wexford, Fianna Fail) | Oireachtas source

The proposed amendment is to section 99 of the principal Act which sets out the mandatory requirements for a personal insolvency arrangement. Section 99(2)(b) provides that the maximum duration of a personal insolvency arrangement shall be six years or 72 months, with an option to extend it by 12 months in specified circumstances, if the personal insolvency arrangement itself so provides. The effect of this amendment is to provide that the maximum six-year term only applies to a personal insolvency arrangement where the secured debts total less than €2 million. I hear the Senator's concerns around that. As noted, a much larger Bill is coming later in the autumn and it is hoped many of these other issues will be addressed in that and as part of the review. Where total secured debt exceeds €2 million, the maximum duration is 10 years or 120 months.

While I understand the Senator's intention, having consulted the Insolvency service of Ireland, the view is taken that higher levels of debt do not mean greater income or repayment capacity. The debtor may have no assets to realise. A debt of €2 million could be secured by an asset that is of no value or by a personal guarantee. A term of ten years would run counter to the main purpose of the personal insolvency Acts, which is to provide mechanisms to the effective resolution of unsustainable debt in a reasonable period in the interest of both the debtors and the creditors and to get insolvent individuals economically active again. The amendment would appear to constitute a major incentive for a person whose secure debts exceed €2 million to opt instead for bankruptcy where the normal term is now one year, rather than facing into a personal insolvency arrangement of up to ten years' duration. Again, this appears to run counter to the object of the legislation, which is to provide a viable alternative to bankruptcy which can offer a better outcome for both creditors and debtors.

The insolvency service advises that there is no apparent demand for a very protracted personal insolvency solution. On the contrary, the clear trend is to conclude shorter insolvency arrangements than the permitted six-year maximum. The average duration of the personal insolvency arrangements that concluded successfully in 2020 was slightly under two years or 630 days. The concern is that the proposed amendment would create a two-tier personal insolvency arrangement that adds complexity and will be harder to administer. Moreover, such a change would have extensive implications and would require changes to the standard personal insolvency protocols and standard terms and conditions for personal insolvency arrangements negotiated and agreed between the stakeholders and the insolvency service. It would also require changes to the practices and IT systems of personal insolvency practitioners, the insolvency service and the courts. The administrative burden and extra cost that would be generated would appear to be quite considerable. On a technical point, the amendment as drafted does not address the issue of a debt that is bang on €2 million.

Based on these considerations, the Minister is firmly opposed to this amendment.