Deputy Stephen S. Donnelly asked the Minister for Justice and Equality the annual budget of the Insolvency Service of Ireland since its foundation in 2012. [7088/18]
234. Deputy Stephen S. Donnelly asked the Minister for Justice and Equality the number of insolvency solutions the Insolvency Service of Ireland has overseen (details supplied) since its inception, in tabular form. [7089/18]
235. Deputy Stephen S. Donnelly asked the Minister for Justice and Equality his views on whether the Exchequer is getting value for the cost of the Insolvency Service of Ireland and the number of solutions delivered. [7090/18]
236. Deputy Stephen S. Donnelly asked the Minister for Justice and Equality his views on whether the personal insolvency regime is fit for purpose; and if so, the method he is using to calculate this. [7091/18]
Minister for Justice and Equality (Deputy Charles Flanagan): I propose to take Questions Nos. 233 to 236, inclusive, together.
The annual expenditure of the Insolvency Service of Ireland (ISI), since it was established, is set out in the following tables:
|Year||ISI Annual Expenditure €,000|
The following table shows the number of cases the ISI has helped since its launch through to the end of 2017:
|Type of Insolvency Solution||Total Number of Cases (to the end of 2017)|
|Personal Insolvency Arrangement (secured and unsecured debt)||2,175|
|Debt Relief Notice (for debts below €35K)||1,177|
|Debt Settlement Arrangement (unsecured debt only)||678|
|Bankruptcy (secured and unsecured debt over €20K)||1,926|
The ISI was established in 2013 and is a central element of the personal insolvency regime. The ISI’s objective is to restore people who are insolvent to solvency in a fair, transparent and equitable way.
International experience demonstrates that it takes several years for a new insolvency regime to really gain traction. However, to date, the ISI has returned over 6,000 debtors to solvency with over 2,000 of those cases being Personal Insolvency Arrangements (PIAs) which deal with mortgage debt.
In over 90% of these PIA cases, debtors have been able to stay in their homes. This is a significant achievement given that many cases involved arrears exceeding 720 days and is an important indicator that the system is achieving positive results for indebted borrowers.
The solutions introduced in the Personal Insolvency Act 2012 have also had an indirect impact on the number and quality of over 120,000 informal agreements between debtors and creditors, as reported by the Central Bank of Ireland. Because arrangements agreed under the Act are public and court approved, they set precedents for the terms of agreements that will be acceptable to a court. Debtors now have realistic alternative options available to them through the ISI if negotiations break down.
To date the value of debt involved in applications to the ISI, including bankruptcies, has exceeded €9.6 billion.
Insofar as the overall effectiveness of personal insolvency arrangements are concerned, the Personal Insolvency Act 2012 modernised the regime for personal insolvency and brought Ireland in line with international best practice by providing for a range of debt resolution options within a statutory framework which balances the rights of creditors and debtors. The Personal Insolvency Arrangement, in particular, is an innovative solution that seeks to restructure or settle secured debt. Other important elements of this framework include the minimum statutory protection laid down regarding the debtor's reasonable living expenses and their home.
The Government has introduced a number of amendments and supports, since 2012, to ensure the success of the solutions provided by the Personal Insolvency legislation. These include the section 115A Court review process and the Abhaile Mortage Arrears Resolution Service.
The section 115A Court review process, introduced with effect from November 2015, permits a debtor to ask the Court to review and assess the reasonableness of a PIA proposal which has been refused by creditors and which includes mortgage arrears on the debtor's home. The Court considers the reasonableness of the refusal using a balanced range of criteria and has power, if satisfied, to impose the proposed personal insolvency arrangement on the dissenting creditor(s). This removes the so called "Bank Veto".
The High Court has published a number of important detailed judgements on the criteria that will be applied by the courts in section 115A review cases, and the types of mortgage arrears resolutions that may be imposed. Those precedents involved the following issues:
- Separated Spouses - a case involving a separated spouse who restructured her mortgage. The Court rejected a claim by the bank that, before any restructure, the bank needed the cooperation of the other joint borrower.
- Rejection of unsustainable warehousing proposal and approval for negative equity write-off - a case where the mortgage lender wanted to warehouse part of a mortgage. The Court ruled that this could not be done unless there is a reasonable prospect of the couple paying back the warehoused amount. The PIA wrote off most of the negative equity.
- Fixing interest rate for the long term - a case concerning a mortgage rate fixed for 27 years. In assessing if this unfairly prejudiced the financial institution (a fund rather than a bank), the court looked at market investment returns rather than the rates and terms that are available to a bank to raise capital and decided that the PIA proposal was fair and reasonable in this context.
A further significant High Court judgement, dealing with technical challenges made to the Section 115A process, was also issued at the beginning of February. This ruling has been positively received by both the ISI and Personal Insolvency Practitioners. Subject to any possible appeal, it is expected to lead to increased activity in Personal Insolvency Arrangements.
Another important enhancement is Abhaile, the Government's national Mortgage Arrears Resolution Service, which ensures that people who are in danger of losing their home have access to free professional advice, including advice from a Personal Insolvency Practitioner. Abhaile was introduced in 2016 to allow further enhanced access to the personal insolvency regime. Abhaile offers detailed financial and legal advice to homeowners in mortgage arrears with the aim of allowing them to find a solution to their arrears and to stay in their homes where possible. Take up of the Abhaile scheme has been high, with over 10,000 vouchers for these consultations issued since the start of the scheme in July 2016. A borrower may also apply for legal aid through Abhaile to seek a court review under section 115A. Abhaile is also raising awareness of the scheme through a targeted Abhaile public information campaign.
Finally, my Department is also finalising a review of the operation of the Personal Insolvency Acts. Submissions made by stakeholders via a public consultation have made a range of recommendations to enhance the process and to support increased engagement with the system. I look forward to bringing proposals to Government in the coming months to address the conclusions of the review.