The Government has announced new legislation designed to reform Ireland’s “arcane” bankruptcy laws and assist householders struggling with mortgage debt.
Minister for Finance Michael Noonan and Minister for Justice Alan Shatter unveiled the Personal Insolvency Bill today, under which debtors will be allowed to emerge from bankruptcy after three years rather than the current 12.
The proposed Bill also includes new voluntary non-judicial debt settlement systems aimed at providing alternatives to formal court insolvency, such as the introduction of a personal insolvency arrangement for the agreed settlement of both unsecured and secured debt of more than €20,000.
Mr Shatter said that in bringing forward the draft the Government was delivering on a "crucial promise" made in the programme for government to radically reform the State's insolvency system.
"When enacted this legislation will be one of the key legislative instruments for addressing the financial difficulties of general insolvency; mortgage debt and negative equity," he said.
The heads of the complex Bill, which will reform the Bankruptcy Act of 1988, were approved at yesterday’s Cabinet meeting.
The Bill will allow for an introduction of automatic discharge from bankruptcy after three years rather than 12 years. The insolvency period in the North and Britain is one year and the Government is keen to ensure people are not incentivised to seek to affect insolvency outside the jurisdiction.
There will also be a series of non-judicial elements to the Bill, aimed at providing a rebalancing of interests between lenders and borrowers. These include the introduction of a debt relief certificate to allow for the full write-off of qualifying unsecured debt up to €20,000 after a one-year moratorium period.
A debt settlement arrangement for the agreed settlement of unsecured debt of more than €20,000 will also be introduced if the Bill is enacted as proposed. The third measure, the personal insolvency arrangement, would cover mortgage debt and speculation has centred on an arrangement lasting some six or seven years in this area.
A new State agency will be established to oversee the new insolvency measures.
The proposed legislation is to go before the Oireachtas justice and defence committee, where it would be “discussed exhaustively” and there would be an “absolute open approach to all the stakeholders”. He described the proposed new laws as challenging and necessary.
Any submissions received by March 1st from interested parties will also be taken into consideration in the further development of the Bill by the Attorney Generals Office in consultation with the Department of Justice and Equality and the Department of Finance.
Separate proposals arising from the recent Keane report on mortgage arrears and personal debt are expected to follow the publication of the Bill. “It is a major step, with more measures to follow, in relation to addressing the mortgage difficulties many people find themselves in.”
The publication of the Bill is a condition imposed by the EU and the IMF as part of the bailout package. In the latest revision to the memorandum of understanding, publication of the proposed legislation was deferred until the end of April.
Mr Noonan said the announcement was only one element of the Government's strategy for dealing with mortgage arrears and that significant work was underway on the other elements.
"The Government is committed to assisting those who cannot pay their mortgage through carefully targeted measures," he said. "All of the measures on which we are working, including the Scheme of the Personal Insolvency Bill being announced today, are directed at those in need of assistance. In these difficult times, the taxpayer cannot be expected to provide assistance to those who can afford to pay their mortgages."