Friday, 30 April 2021
Personal Insolvency (Amendment) Bill 2020: Report and Final Stages
I move amendment No. 1:
In page 9, to delete lines 9 and 10 and substitute the following: "11.Section 91 of the Principal Act is amended—(a) in subsection (1)(e) by the insertion of "or a confirmation of truth" after "statutory declaration","(2) The criterion referred to in subsection (1)(g) shall not apply where it has been established that, having regard to the financial circumstances
(b) in subsection (1)(g) by the deletion of "has made a declaration in writing declaring that he or she", and
(c) by the substitution of the following for subsection (2):
of the debtor as disclosed in the Prescribed Financial Statement completed by the debtor, if the debtor were to have entered into an alternative repayment arrangement with the secured creditor concerned of a type provided for in any process relating to mortgage arrears operated by that secured creditor (being a process approved or required by the Central Bank of Ireland) the debtor would be unlikely to become solvent within the period of five years commencing on the date of completion of the Prescribed Financial Statement by the debtor.".".
I will not be pressing the amendment, just in case anybody is panic-stricken.
I proposed this amendment on Committee Stage and at the request of the Minister of State, I withdrew it and indicated I would consider what he had said in reply. I want to make the following observations. The Minister of State told the House the Insolvency Service of Ireland had advised that there was no history to date of people arranging their affairs to avail of a personal insolvency agreement in an improper way. On reflection, it seems that was because it was literally impossible to do so. The cut-off date that used to exist, 1 January 2015, which the Bill removes, was already in the past when section 115A was introduced. It was a very effective safeguard.
I notice Senator Keogan coming into the Chamber to second the amendment but it has already been done.
I reiterate my point that the fact this cut-off date existed was recognised in a number of court decisions as an important counterbalance and that counterbalance has been taken away. The objection that the amendment does not specify the proofs that a debtor would need is, arguably, misconceived. The proofs depend on the facts of individual cases and legislation does not usually exhaustively list evidential proofs. This whole process is not supposed to be a mere tick-the-box exercise. It is about establishing eligibility as a matter of fact. If debtors did co-operate with their lender, as the Minister of State said, the lender would have a record of that and there would be no need to prove it because it would not be put in issue. A creditor's mortgage arrears resolution process, MARP, is a formal documented process so it should be easy to prove or disprove participation.
Finally, while the Ali case is a rare example of a reserved decision on a personal insolvency practitioner's declaration, that is partly because most cases were heard, at first instance, in the Circuit Court. Again, the Minister of State should bear in mind that sections 91(1)(g) and 91(2) are rather toothless thresholds or defences against abuse of the system. Insolvency practitioners are in the position that they are asked to make declarations all the time. There is a significant temptation that some of these will be meaningless and just simply a box ticking exercise. I am aware of one case in Monaghan before Christmas, where a debtor who was later held not to be insolvent at all, had made no payments at all for four years despite admitting to having a surplus income of around €3,000 a month. The person had not engaged in any way with his lender. In that case, his practitioner had no qualms about certifying his eligibility, which was duly rubber-stamped by the Insolvency Service of Ireland. So I am just saying that the potential for abuse, which this amendment was intended to counter, is there and should not be underestimated. I have failed to persuade the Minister of State of the merits of my proposal so I will not push it any further but I did think that I should have an opportunity to reply to the points made by the Minister of State.
I am very conscious of what Senator McDowell has said about not pushing his amendment and the basis for that. I know that the amendment is well intentioned but I feel that it would be appropriate to mention my concern. To pass this amendment would be to put on a statutory basis a need for the debtor to engage with the lender before ever going to a personal insolvency practitioner or to seek the independent advice that comes with that process. All of the legislative framework behind this Bill that has led us to this point has been put in place to facilitate a circumstance where debtors are, invariably, in dire circumstances. Sometimes when considering insolvency legislation there is a danger that we think insolvency is an easy way out or it can be perceived as an easy way out. I do not think that anybody who has been through the process would think that, nor should anyone be under the misapprehension that bankruptcy, insolvency or whatever term one wants to use is in any way an easy solution to a very difficult problem.
My understanding of all of this legislation is that it is designed to aid people who are in a dire circumstance and seek to get out of it. One of the fantastic measures that has been put in place by the Government is the existence of personal insolvency practitioners. They are people who are independent from the creditors in this matter, independent from the banks and who offer independent advice to people in a dire circumstance. I would have a difficulty with the notion that debtors would be statutorily obliged to engage with the banks at a time when they are very vulnerable, and when there is a real danger that banks can put pressure on them that may not be helpful in this situation. We know that the banks prefer the mortgage arrears resolution process as it suits their purposes better.One of the small victories, if I can put it that way, or one of the small safeguards that is in place for the person who is in a debt hole, where he or she almost cannot see the way out, is that he or she can turn to somebody who can give that person that impartial and independent advice to help him or her find their way out of that hole and to see the light at the end of the tunnel, which invariably will be difficult in any event. I feel that if we were to pass this amendment, it would redress that balance in the wrong direction. It would mean the debtor, who is already in a difficult position, vulnerable and subject to huge pressure, would now be obliged to go to his or her creditor and engage with them at a point when he or she is very vulnerable in the process. I think the legislation is saying the debtor should be turning to an independent adviser who can give him or her impartial advice on how he or she can find his or her way out of the situation he or she has got into. That is why, in all the circumstances we should be providing a clear path for people in difficulty to a personal insolvency practitioner who can help advise them in an impartial way towards finding a way out of their debt.
I take on board what Senator Ward has said. I will not press the amendment any further. However, I do worry an obstacle is being removed which existed in the form of a cut-off date. That is now gone. I hope practitioners will take the certificates they produce seriously in future.
I appreciate that the amendment has been withdrawn, but I do hear the Senator's concerns. Obviously, any certificates should be looked at and closely examined. I outlined on the previous occasion our concerns about accepting such an amendment. Those concerns still remain.