IN THE FACE of growing criticism of the current personal insolvency laws, the government has acknowledged that the current regime needs to be “energised”.
The coalition will oppose Fianna Fáil’s Family Home Mortgage Settlement Arrangement Bill in the Dáil tonight. The draft law essentially removes the controversial bank veto on proposals to restructure a family home mortgage through the personal insolvency process.
The Personal Insolvency Act contains a number of debt resolution processes which are intended to offer an alternative to bankruptcy and can can involve writing off a portion of a debtor’s unsecured debts.
However, in many cases banks have a veto over the deal because they often represent the largest creditor in a given situation. This is presenting a particular problem in relation to family home mortgages and Fianna Fáil has expressed a concern about the “ramping up” of repossessions.
“At the moment the Insolvency Service of Ireland is being completely underutilised. Fewer than 1,000 cases were processed in the first year when it was expected to be 15,000,” the party’s finance spokesperson Michael McGrath explained today.
We would utilise the insolvency structure that is already in place in order to allow people who have fallen in to arrears on their mortgage to get an order specifically relating to the family home. This is very important as it ensures that there are no additional costs imposed on the State from the setting up of a new structure.
Banks need to engage
However speaking in the Dáil today, Taoiseach Enda Kenny said that Fianna Fáil’s solution would result in many cases being referred to the courts. He also expressed concerns about the constitutionality of the bill.
Over 37,000 mortgages are in arrears of two years or more and Kenny said that banks need to inform people of the availability of the insolvency service:
Nobody wants to see a family home lost here and that’s why it’s important, I think, that the banks themselves should be informing them of the availability of the insolvency agency. Minister Shatter worked exceptionally hard to put that in place and these people need that solution.
The government intends to oppose tonight’s bill but will refer issues in relation to the insolvency process to the Oireachtas Justice Committee for consideration in the coming weeks.
A government spokesperson said that while three in four arrangements are being signed up to by banks “the entire insolvency process needs to be energised a bit”.
They said that while the process is working “there needs to be a bigger turnover” with more cases going through the Insolvency Service of Ireland.
They added that the issue is “matter is of concern to government” and that it would wait to hear what the committee has to say on the matter.
Separately, a spokesperson for Tánaiste Joan Burton said this evening that she “is broadly supportive of the principles” of a bill being proposed by Labour backbencher Willie Penrose.
The bill would see the amount of time a person spends in bankruptcy reduced from three years to one. Under the insolvency reforms introduced by the current government, the bankruptcy process has been reduced from 12 to three years.
A spokesperson for the Taoiseach said there were “a lot of individual views” about reducing the bankruptcy period further, adding that they are not necessarily “party political related”.
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