Michael Collins (Cork South West, Independent)
Link to this: Individually | In context | Oireachtas source

102. To ask the Minister for Justice and Equality if she will consider reducing the personal insolvency arrangement time period from six to three years for persons and families; and if she will make a statement on the matter. [14474/17]

Frances Fitzgerald (Dublin Mid West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Personal Insolvency Arrangements (PIAs) were introduced by the Personal Insolvency Act 2012 and are designed to resolve unsustainable debt and restore an insolvent individual to solvency, while providing for fair repayment to creditors to the extent that the insolvent person's means reasonably permit.

The PIA is designed specifically for resolving secured debt (such as a mortgage), although it can also include and resolve any unsecured debts. A PIA includes a number of important statutory protections for the debtor. These include the right to reasonable living expenses before payments to creditors are fixed, a statutory priority for their continued ownership and occupation of their home subject to the conditions set out at section 104 of the Act, a right of court review (subject to certain conditions) under section 115A if creditors reject a reasonable PIA proposal by a debtor, a return to solvency on completion of the payments envisaged by the PIA, and protection from other enforcement action by creditors during the period of the PIA.

It is important to note that the Personal Insolvency Act does not set any minimum duration for a PIA. Section 99 of the Act sets the maximum duration of a PIA at 6 years, although this period may be extended for up to a year in certain circumstances. In fact, many PIAs are concluded with a very short duration. Analysis by the Insolvency Service of Ireland of a sample of 100 recently concluded PIAs showed that 43% provided for a period of less than 12 months, while 41% lasted from five to six years. None was concluded for longer than 6 years.

This flexibility regarding the duration of a PIA is an important element which can significantly benefit the debtor. Allowing a longer period can be very important in allowing an insolvent person to put together a proposal which can be accepted by creditors and, in particular, can be sufficient for them to remain in their home. It can allow for a person in financial difficulty, or with temporarily reduced income or working hours, to recover from illness or unemployment, retrain, or increase or restore their earning capacity.

Reducing the maximum length of a PIA from six years to three years is likely to have the unintended effect of denying some debtors the opportunity to avail of a PIA as they would not be able to make sufficient payments to creditors during the shorter arrangement period. The Act's provisions already allow a PIA to be concluded for a much shorter period where this is desirable in the light of the debtor's individual circumstances.