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Personal Insolvency Bil 2012: From the Seanad (Resumed) (Continued)

Wednesday, 19 December 2012

Dáil Éireann Debate
Vol. 787 No. 4

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  Seanad amendment No. 198:

Section 146: In page 120, between lines 8 and 9, to insert the following:

“(3) A person whose bankruptcy has been discharged by virtue of this section may apply to the Official Assignee for the issue of a certificate of discharge from bankruptcy.”.

  Seanad amendment agreed to.

  Seanad amendment No. 199:

Section 146: In page 120, between lines 22 and 23, to insert the following:

“(3) A person whose bankruptcy has been annulled may apply to the Official Assignee for the issue of a certificate that the bankruptcy has been annulled.”.

  Seanad amendment agreed to.

  Seanad amendment No. 200:

Section 146: In page 120, to delete lines 23 to 49 and in page 121, to delete lines 1 to 3 and substitute the following:

(1) The Court may, on application being made to it by the Official Assignee or the trustee in bankruptcy, make an order requiring a bankrupt to make payments to the Official Assignee or the trustee in bankruptcy from his income or other assets for the benefit of his creditors (a ‘bankruptcy payment order’).

(2) An application for a bankruptcy payment order may not be made after the bankrupt has been discharged from bankruptcy, but where an application for such an order is made before the discharge of the bankrupt, the Court may make a bankruptcy payment order after the date of discharge as if the bankrupt had not been so discharged.

(3) An order made under subsection (1) shall have effect for no longer than 5 years from the date of the order coming into operation, and where, during the order’s validity, the court has varied the order under subsection (5) such variation shall not cause the order to have effect for a period of more than 5 years, and in any event, any order made under subsection (1) or varied under subsection (5) shall cease to have effect on the 8th anniversary of the date on which the bankrupt was adjudicated bankrupt.

(4) In making an order under subsection (1) the Court shall have regard to the reasonable living expenses of the bankrupt and his or her dependants and the Court may also have regard to any guidelines on reasonable living expenses issued by the Insolvency Service under the Personal Insolvency Act 2012 or by the Official Assignee.

(5) The Court, on the application of the bankrupt or the Official Assignee or the trustee in bankruptcy, may vary a bankruptcy payment order granted under subsection (1) where there has been a material change in the circumstances of the bankrupt.

(6) The court in granting an application under subsection (1) may order any person from whom the bankrupt is entitled to receive any salary, income, emolument, pension or other payment to make payments to the Official Assignee or trustee.

(7) For the purposes of this section, where a bankrupt is, or may become entitled to, payments under a relevant pension arrangement, an asset relating to the arrangement (other than payments already received by the bankrupt, or that the bankrupt was entitled to receive, under the arrangement) shall not be regarded as an asset.”.”.

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt Is the amendment agreed?

Deputy Stephen S. Donnelly: Information on Stephen Donnelly Zoom on Stephen Donnelly No, it is not agreed.

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt Does the Deputy wish to speak?

Deputy Stephen S. Donnelly: Information on Stephen Donnelly Zoom on Stephen Donnelly Yes, if I may. I apologise for not being here earlier. The Joint Committee on Finance, Public Expenditure and Reform was speaking with the public interest directors from Permanent TSB and what we heard is relevant to this amendment.

I supported this legislation all the way through, fully support the Minister's intention in its regard and fully appreciate his engagement with the Oireachtas. The amendment at stake concerns the bankruptcy payment order. It states that after the three years of bankruptcy the creditor may apply for an additional five years of payments. 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.

For me, the single most important part of what the Minister is trying to do in terms of getting good outcomes at the negotiating table so that there is no need to go to court is having a credible threat from the borrower. As the Minister knows, I am particularly interested is distressed mortgages. If the bankruptcy period was three years and the payment order could not exceed that period this would allow for a very credible threat from the borrower. In effect this permits the borrower to say, "If you, the bank, are not willing to engage in the spirit of this legislation as laid out by the Minister, and I agree with how he wants it to work, I am willing to put myself and my family through three very tough years in order to escape this debt. What I want you, the bank, to do is to engage reasonably and in the spirit of the legislation. If you do not, I can suck it up for three years". That is a credible threat.

In my view, what will happen now - those who deal with these situations every day, representing distressed mortgage holders agree - is that when that threat is made the bank will claim the period is not really three years but eight years. 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. We can debate how that might actually play out and the Minister's intent for how this might play out, but at the negotiating table where the bank is on one side and the distressed borrower on the other, that threat from the bank will now be able to reference the three paragraphs of Seanad amendment No. 200. I believe the bank will get away with a counter-threat that claims the period is not three years but eight. The borrower's child may be entering primary school this year but by the time the bank is finished with the him or her, that child will be entering secondary school. There are very many men and women in Ireland who desperately need to use this legislation but the banks will successfully stop them from doing so because eight years is no longer a credible threat.

This is backed up by the comments yesterday made by Richie Boucher, the chief executive of Bank of Ireland. Essentially he said his bank would not engage with this legislation, stating, "We are absolutely not going to engage in surrender of debt". He is on the media record, reported as saying that. The committee just spoke to the two public interest directors of Permanent TSB. Deputy Pearse Doherty and I questioned them on what the bank will do in terms of debt surrender, specifically in the context of this legislation. Ray MacSharry stated: "There will be no debt forgiveness - none". He repeated this in various ways. I was shocked. I had not been shocked to hear Richie Boucher say the same, because he is acting absolutely rationally as the chief executive of a private bank in saying his objective is to maximise return to the bank. It is not to better society - that is the objective of the Minister and Members of the Houses. However, I was shocked to hear one of our public interest directors say this. I gave him a specific example, of a borrower who borrowed €400,000 for a house that is now worth €200,000, and who could service a mortgage of €250,000. This is very similar to the example the Minister and I have used. I asked Mr. Boucher if in that case he was stating the position of the bank was that it would not write off, forgive or surrender the €150,000 that would leave the borrower with a mortgage she can afford, leave her in the house and still leave the bank in a better position because the mortgage is €250,000 versus a market value of €200,000. He refused to answer or engage with the question. This is all on the record and has just happened.

My position has always been that legislation which requires banks to voluntarily surrender debt is not going to work. The comments yesterday by Richie Boucher, and those we just heard from Ray MacSharry, back that up. I never had faith that senior managers and boards in the banks would voluntarily surrender a debt, as it is the Minister's intention they should, in this very well-meaning legislation.

I say this with huge regret because I believe this could be the most important legislation the Government will produce in its term. In the context of the comments we have heard both just now and from Bank of Ireland, I believe Seanad amendment No. 200 neuters the legislation. Never mind what Ray MacSharry or Richie Boucher said - I believe the other banks will act in exactly the same way because they will be acting rationally if they do so. They are defending the interest of the banks. None of this mattered if the borrower was able to say, "You know what? We appreciate you do not want to surrender any debt but we will walk away. We will give you the keys and go into three years of bankruptcy and we will walk".

The amendment tabled by Senator John Crown in the Seanad would have limited the payment order to the three years of the bankruptcy. I have no problem with a payment order. There might be a person on a wage of €80,000 who could pay the creditor a certain amount during the bankruptcy period. I have no problem with the principle of a payment order but Seanad amendment No. 200 extends that period in real terms. In our minds we can argue the technicalities: if it is not really an eight year bankruptcy period then the five years means something else. However, at the negotiating table the mind of a distressed borrower will see an eight year period. With huge regret, it is my opinion that Seanad amendment No. 200 will render the Minister's excellent intent in this legislation largely defunct, and for that reason I will oppose it.

I know the Minister is not in a position to accept amendments because they would be a change of policy and he would have to go back to the Cabinet. My understanding is that this Bill is meant to go to the Áras tonight so I understand that what I am saying now will not change the legislation. I fully believe in what the Minister was trying to do; I supported him publically and privately on it all the way through the passage of the legislation. At the last hurdle, I will oppose it, with huge regret, because I believe the banks will use Seanad amendment No. 200 to negate what the Bill is attempting to do. For me, as a public representative, I need no greater proof than the comments yesterday made by Richie Boucher, and those made today by Ray MacSharry within the past two hours. I say this with genuine regret.

Deputy Alan Shatter: Information on Alan Shatter Zoom on Alan Shatter I thank Deputy Donnelly both for raising this issue and for his constructive contribution throughout to this legislation. I am anxious to ensure there is no misunderstanding about Seanad amendment No. 200. I hope to avoid creating too much boredom in the Chamber but I will repeat something I stated previously and appreciate the Deputy giving me the opportunity to do so. Of course, I have not heard the presentation by Mr. Ray MacSharry to which the Deputy made reference. Let us look at what Seanad amendment No. 200 does and its implications for the legislation.


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