New insolvency legislation passes through Oireachtas
Legislation on personal insolvency, which passed through the Dáil and Seanad today, is “the most radical and comprehensive reform of our insolvency and bankruptcy law and practice since the foundation of the State”, Minister for Justice Alan Shatter has said.
The Personal Insolvency Bill 2012 will now be presented to President Michael D Higgins for signature.
Mr Shatter warned banks and their public interest directors they will have to accept when a debt cannot be repaid, under the new law.
He told the Dáil he would amend the Act if necessary to ensure this after Independent TD Stephen Donnelly claimed Permenent TSB public interest director Ray MacSharry had told an Oireachtas committee there would be “no debt forgiveness”.
The Wicklow TD said Mr MacSharry’s comments were backed up by Bank of Ireland boss Richie Boucher on Tuesday. “Essentially he said his bank would not engage with this legislation, stating, ‘we are absolutely not going to engage in surrender of debt’.”
The radical legislation reduces the period of insolvency from 12 to three years and will allow debts of up to €3 million to be written off.
Mr Donnelly had expressed concern about an amendment to the legislation which he said could “neuter” the Bill and extend three years of insolvency. It refers to a creditor being able to apply for an extra five years of payments after the three year bankruptcy period.
“By stating the period in question can be no longer than eight years the amendment confirms that this period could last up to eight years.”
Mr Donnelly said “in the last week of the borrower’s bankruptcy the bank can apply to the court for a payment order and can essentially keep taking money from him or her for another five years”. He believed the banks in negotiations with debtors could “claim the period is not three years but eight”.
He said the real power of the legislation was in “how it plays out at the negotiating table”.
Mr Shatter said however that banks had a duty to try to recoup debt owing to them. “They also have an obligation to recognise a debt which is not recoverable, and not maintain a pretence that some part of a debt which cannot be recovered is recoverable.”
The Bill provided for this “and I hope we do not find ourselves back here too soon having to amend it. However, I have no doubt all of us, in government and in opposition, will be watching very carefully how legislation works in the early months of its operation”.
The Minister said he did not hear Mr MacSharry’s remarks but was of the view that view that if a public interest director of a financial institution publicly or privately states that “in no circumstances will anyone will be afforded the possibility of a capital write off.....that individual is not acting in the public interest, never mind the private interest of the debtor”.
He added: “Perhaps we need to remember that this is a position that those on the boards of financial institutions or chief executives have taken up pending the enactment of the legislation and that when the legislation is enacted, they will have to review their position.”
The legislation also allows for the retention of personal jewellery of sentimental value up to a maximum of €750. Mr Shatter rejected opposition calls for a further increase, having increased the limit from €500. But he said he had misgivings about the measures because it “might actually encourage creditors to seek valuations in future in circumstances where they would not heretofore have approached the issue at all”.
The Minister also increased the allowable value for the vehicle a debtor in insolvency may keep to €2,000.
In a statement after the legislation completed its passage through both Houses, Mr Shatter said it was “a fundamental part of the Government’s strategy to return this country to stability and economic growth”.
While the three debt-resolution processes introduced in the Bill will require court approval, Mr Shatter said they were essentially non-judicial in nature.