The controversial provision in the Personal Insolvency Bill allowing people to write off debts of up to €3 million has been defended by Minister for Justice Alan Shatter.
Mr Shatter said the mechanism had been misunderstood.He said any comments by the troika were on the basis of a complete misunderstanding of the innovative debt resolution proposals.
“This arrangement provides a rescue approach, as opposed to the classical liquidation approach in bankruptcy,” he said.
Mr Shatter was speaking in the Dáil during the debate on the report and final stages of the Bill.
He rejected an amendment, moved by Pádraig Mac Lochlainn (SF), reducing the €3 million figure to €1 million. Mr Shatter said the amendment meant those with debts exceeding €1 million “should” be put into bankruptcy.
He said the €3 million provision could, in contrast, result “over a period of years in creditors recouping a larger portion of the money due to them”.
Helping homeowners
Mr Shatter said that one of the important aspects of that part of the Bill was a mechanism whereby people living in “reasonably sized homes, based on their family needs and requirements”, were given the opportunity to retain them and rearrange their debts rather than going into bankruptcy.
“That is a major objective of this Bill,” he added.
The provision, he said, was not about providing “some easy mechanism” for speculators. The person involved might be just a business person who invested badly.
The Bill provided an alternative mechanism to bankruptcy which would assist people who were in homes with negative equity and had other debts and who could not pay, as opposed to would not pay, said Mr Shatter. It would help restructure their positions.
“This is insolvency legislation; it is not just dealing with the mortgage on the family home,” he added.
Mr Mac Lochlainn said the IMF and a range of academic experts had argued that the figure was too high. He added that a cap of €1 million was enough to capture all those in significant personal debt. “This is one of the core issues, in relation to the Bill, that we would have a problem with,” he said.
Niall Collins (FF) said that in the case of a person with an average mortgage of between €250,000 and €280,000, issues of personal debt, as well as another mortgage on a buy-to-let property, the total figure would come up short of €1 million. “So you would be capturing the vast majority of people with a ceiling of €1 million.”
Defeated
The amendment was defeated by 92 votes to 34.
Earlier, Mr Shatter assured the House that the legislation would be kept under constant review by him. There would be a total review of how it was working after three years.
“There is no question of our all going to sleep for three years,” he said. “The legislation is like any other: it is very new and we are in the start-up phase.”
Mr Shatter said a full year’s experience of how it was working was probably required. “Even if in that period some blindingly obvious difficulty arises, an amendment will be made, if required.”
Mr Collins said the legislation allowed for the establishment of a personal insolvency regime which would, possibly alone among all State-backed schemes, include no independent appeals function.
Debate on the Bill resumes today.
