Legislation to deal with reform of insolvency laws facing delays
A MAJOR piece of legislation aimed at tackling the State’s personal debt crisis is facing delays of at least two months, The Irish Times has learned.
A draft version of the proposed personal insolvency legislation was published in January, with the Minister for Justice Alan Shatter describing it as the “most radical reform of insolvency law since the foundation of the State”.
He said the Bill would be finalised and ready by the end of April and he expressed the hope it would become law in the autumn.
However, his department confirmed yesterday “the most likely timeframe for publication of the Bill is around the end of June” and said the proposals had yet to be given the green light by the troika.
The Bill proposes the appointment of a State-run insolvency service to help people manage their debt and would cut the bankruptcy period from 12 to three years.
It also introduces three voluntary debt-settlement systems, which will offer people ways to sort out their finances outside of formal court insolvency.
Under proposals both unsecured and secured debt, typically mortgages, would be covered by the new legislation.
The banking industry has furiously contested the inclusion of mortgage debt in the legislation and warned of dire consequences for the sector if people who can’t service their debts are allowed to get write-downs on their mortgages.
The Government also suggested the insolvency arrangements would be voluntary and under the plans, as outlined, major creditors would be able to veto all proposals without any appeals or review process for debtors.
Groups such as the Free Legal Advice Centre (Flac) have warned that if the banks are given such a veto on insolvency arrangements then the legislation is unlikely to resolve the chronic personal debt crisis which has seen more than 100,000 homeowners struggling to pay their mortgages. Last week a major Flac conference heard that the legislation was in danger of failing unless the financial institutions veto was removed.
Prof Jason Kilborn of the John Marshall Law School in Chicago and a leading insolvency expert said the proposed legislation was deeply flawed.
He said it contained “a series of half-measures” which would see it founder because banks were being handed too much power and not being incentivised to deal meaningfully with debt-ridden consumers, he said.
Last night a spokeswoman for the Department of Justice said the bill was still being drafted in co-operation with the Office of the Attorney General and Parliamentary Counsel.
She said it was being discussed with the troika team who are in Dublin this week
“This is a very lengthy and complex bill from a legal standpoint, with proposed provisions which do not currently exist in Irish law,” she said.
The spokeswoman said that its development is still proceeding “in the context of the many submissions received on the Bill which include, the report of the Joint Oireachtas Justice Committee received in early March following their completion of hearings on the Bill” and she stressed that it was “important that we get the Bill right”.