Niall Collins (Limerick, Fianna Fail)
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20. To ask the Minister for Justice and Equality the position regarding credit union loans under the new personal insolvency regime; and if he will make a statement on the matter. [5300/14]

Alan Shatter (Dublin South, Fine Gael)
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Recent media coverage suggested that individual debts to credit unions which were in excess of €20,000 may be secured by an insurance policy with the credit union and would therefore be ineligible for inclusion in a Debt Settlement Arrangement under the Personal Insolvency Act 2012. The position as to whether or not a credit union is deemed to be a "secured creditor" will depend on the nature of the policy in place and ultimately, it will be a matter for the personal insolvency practitioner acting on behalf of the debtor to determine.

In order for a life insurance policy to comprise security under the Personal Insolvency Act 2012 two criteria need to be met, i.e. (i) the security must be "in or over property of the debtor", meaning that the policy must be in the borrower's name and not part of a block policy of the credit union; and (ii) an assignment of the life insurance policy from the borrower to the credit union has to have taken place. If a policy is not in the borrower's name, the policy is not property of the debtor, and therefore the debtor is not capable of giving security over it to the credit union. The Insolvency Service of Ireland has advised that it understands that in the majority of cases, life insurance policies linked to credit union loans are provided through block policies and therefore would not meet the definition of secured debt in the Personal Insolvency Act 2012.

It should also be noted that in any cases where a credit union loan might be deemed to be a "secured" debt, it would be possible for the debtor to pursue a Personal Insolvency Arrangement (PIA) which is specifically designed to deal with secured debts.