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Committee on Justice, Defence and Equality report on Personal Insolvency Bill

Families should be facilitated as far as possible to remain in the family home in any insolvency arrangement and the Minister should examine the possibility of including such a provision in legislation, according to a report on hearings in relation to the Scheme of the Personal Insolvency Bill by the Joint Committee on Justice, Defence and Equality.

The Committee also noted that the Bill contained little detail on how Personal Insolvency Trustees (PITs) would be regulated and paid and the kind of expertise or qualifications which would be required of them.

Members felt very strongly that MABS, if properly resourced, could take on this primary role and avoid any potential delays to clients in need of advice. The Committee recommends the regulation of former mortgage brokers who may wish to act as PITs.

Chairman of the Committee, Deputy David Stanton said: “The current bankruptcy legislation is outdated and any attempt to address this issue is welcome. We recognise that the Bill is one part of a package of measures aimed at tackling the problem of over-indebtedness in Ireland and seeks to address very complex areas of law and finance. Many people are under major financial and personal stress where, in quite a number of cases, the danger of losing the family home is a real fear. We all need to work together as hard and as fast as possible to find workable and fair solutions to the problem of personal insolvency. The Committee hopes this work and our recommendations and observations will inform the legislative process and make a valuable contribution to the forthcoming legislation.”

Among the report’s major recommendations and observations:

• An appeals mechanism should be put in place where creditors refuse a proposed arrangement;
• There should be a binding consequence for a creditor who acts in an unreasonable manner;
• Secured and un-secured debt should not be segregated when considering a Personal Insolvency Arrangement – credit card bills, utility bills, etc should all be taken into account in the framing of any arrangement;
• Sustainable mortgages should not be allowed to enter an insolvency regime – a decision on determining when a mortgage is viable or becomes unsustainable should be made by the Credit Review Office, or a similar body;
• Concerns were raised about the minimum protected income that any debtor applicant should be allowed to retain, free from creditor distribution. In particular, concerns were raised about interest only payments which leave debtors ‘standing still’ and serve only to sustain the profits of the financial institution in question without helping the position of the debtor;
• The Committee stressed that a ‘clawback’ in the event of an uplift following a successful Personal Insolvency Arrangement should not act as a disincentive to people seeking career advancement and that the appeals body would make a decision in relation to this;
• The Committee agreed with the initial bankruptcy period of three years, but considers the additional period harsh, with potential for an income attachment over a further five years amounting to a de facto eight year bankruptcy;
• Issues round bankruptcy tourism should be examined by the Department;
• The thresholds provided in the Bill for the various debt settlement regimes were generally too low and a two-tier insolvency system may emerge from the current thresholds;
• The Committee would favour the use of the Circuit Court for insolvency proceedings. The current jurisdiction of the High Court on insolvency proceedings places excessive cost on applicants.
• The 10 year evaluation for the operation of the Bill is too long and the Committee recommends that a report be prepared by the Minister on the operation of the Bill and submitted to the Committee every three years.

Deputy Stanton concluded: “We recommend that the Minister for Justice and Equality gives consideration to the issues, observations and concerns raised in this report in the final drafting of the Bill. We look forward to further engagement with the Minister as the Bill progresses through the Houses of the Oireachtas.”