Fianna Fáil has today (Wednesday, 12 October) published a bill to establish a Debt Settlement and Mortgage Resolution Office and provide an independent, non-judicial debt settlement system for persons struggling with personal debt and those in difficulties with their mortgage.
Fianna Fáil Finance Spokesperson Michael McGrath will seek leave to introduce the Debt Settlement and Mortgage Resolution Office Bill 2011 in the Dáil today. Fianna Fáil intends to use its Private Members Time in the Dáil next week to debate the Bill.
Deputy McGrath stated, “This Bill is based on the recommendations of the Law Reform Commission’s Report on Personal Debt Management and Debt Enforcement of last December and the associated draft Personal Insolvency Bill. However, we have decided to extend the scope of the Personal Insolvency Bill to include the growing problem of mortgage debt. The Law Reform Commission is to be commended for their excellent work in this area and we believe the Oireachtas should be favourably disposed to accepting their recommendations.
“Under the Fianna Fáil Bill, a person struggling to cope with personal debt can apply to the new office for a Debt Settlement Arrangement. Following a comprehensive assessment of the person’s financial affairs, a personal insolvency trustee makes a proposal to the person’s creditors. Where 60% of the person’s creditors (in value) approve the proposal to restructure the person’s debts over a maximum period of five years, the proposal then becomes binding on all creditors. The approved Debt Settlement Arrangement is registered in the Personal Insolvency Register.
“In a separate process involving MABS, a borrower who is deemed to be an insolvent debtor can apply for a Debt Relief Order. The office has the power to issue a Debt Relief Order. Once a Debt Relief Order is granted, a creditor cannot commence any legal proceedings for a recovery of the debt in the Order for a period of twelve months after its granting. At the end of the 12 months, the debts which are subject to the Debt Relief Order are deemed to be discharged.
“In relation to mortgages, a borrower may apply to the office for a Mortgage Resolution Order in respect of the family home. Following a thorough process involving the borrower and the financial institution, the office has the power to impose a binding Mortgage Relief Order to restructure the mortgage. The Bill proposes to afford the office a number of options which can be included in the Order, including: interest only payments for up to 4 years; extending the period of the mortgage by up to 20 years; a repayment holiday for up to 12 months; an adjustment to the interest rate to bring it in line with market rates; a debt for equity swap; participation in the deferred interest scheme and, in the event of voluntary surrender, that the financial institution lease the family home to the borrower at a market rent.
“The Mortgage Resolution Order process will ensure that all distressed mortgage-holders are dealt with in a consistent manner by an independent office. The Order will be binding and gives the borrower the certainty and space required to work through their financial difficulties so that they can retain their family home.
“In addition, the Bill establishes a Debt Enforcement Office to oversee the implementation of the debt enforcement procedures across the country. This work is carried out by Debt Enforcement Officers.
“I believe that all political parties and those of no party have a duty to come up with solutions which can assist those struggling with high levels of personal debt and those experiencing difficulties in making their mortgage repayments on the family home. I sincerely hope the Government considers this Bill in the spirit with which it is being offered. I believe this Bill can form the basis of a radical overhaul of Ireland’s personal insolvency regime and can allow thousands of distressed borrowers to see some light at the end of the tunnel.
“I look forward to a full and constructive debate on this Bill during Private Members Business next week.”