Fianna Fáil Finance spokesperson Michael McGrath has described comments by the Minister for Finance in the Dáil today pouring cold water on proposals to reduce the current term for discharge from bankruptcy from 3 years to 1 year as a clear rebuff to his Labour party colleagues.
In response to questioning from Deputy McGrath, Minister Noonan stated: “Currently there is a lack of analysis of unintended consequences around further reducing the bankruptcy term to one year. I would be concerned that if we act in haste on this issue, without having conducted rigorous analysis of the objectives and impacts of such a change, we may not achieve the best outcomes for entrepreneurs or private individuals.”
The Minister added: “Bankruptcy is a big step for borrowers and one that may not deliver the desired result of retaining the family home. It is my understanding that of those who had a family home and were declared bankrupt in 2014, approximately 70% have lost or are expected to lose their home. Banks are the best protected creditors in bankruptcy.”
Deputy McGrath commented: “I believe the proposal to reduce the bankruptcy period to one year should be carefully examined. However, while bankruptcy may be appropriate in certain circumstances, it is not a solution for the vast majority of households whose primary financial difficulty relates to their family home mortgage. The bottom line is that families in mortgage arrears should not have to become bankrupt to have their mortgage restructured and put on a sustainable footing.
“The Minister now needs to bring forward proposals which will have a much wider application in the mortgage arrears crisis. We provided him with a template in our Family Home Mortgage Settlement Arrangement Bill 2014 which would have adapted the under-utilised Insolvency Service to allow a dedicated mechanism for dealing with the family home. The statistic provided in the Dáil by the Minister in this morning that 70% of people who went bankrupt in 2014 will end up losing their home is sobering and underlines the point that ordinary people struggling with their mortgage should not be forced down the bankruptcy road. The way forward now should be to remove the veto that banks currently possess in relation to restructuring arrangements involving a mortgage on a family home,” concluded Deputy McGrath.