Michael Noonan downplays reduction in bankruptcy term

Minister for Finance Michael Noonan has downplayed suggestions of a move to reduce the term of bankruptcy from three years to one.

Mr Noonan said more time was needed to assess the effectiveness of the current three-year term introduced in December 2013, a reduction from the previous 12-year term.

Mr Noonan said the data gathered thus far indicated that “persons who enter bankruptcy lose their homes more than people who do not”.

Mr Noonan said data from the Insolvency Service of Ireland showed 58 bankruptcies in 2013, a number which rose significantly to 448 last year.

The Minister said: “I do not have a particularly fixed position [on the duration of bankruptcy].”

“If another term works better so be it, but I would like to have it evidence-based rather than change being made for the sake of it and on the basis of a lack of evidence.”

Mr Noonan said that bankruptcy was a “big step” for borrowers and “one that may not deliver the desired result of retaining the family home”.

The Minister said that 70 per cent of those who had a family home and were declared bankrupt in 2014 had lost or were expected to lose that home.

Mr Noonan expressed concern that if they “acted in haste” to introduce a reduced bankruptcy term, without rigorous analysis, “we may not achieve the best outcomes for entrepreneurs or private individuals”.

‘Sobering statistic’

Fianna Fáil finance spokesman Michael McGrath, who raised the issue during Dáil finance questions, said the figure of 70 per cent of those going bankrupt losing their home was a "pretty sobering statistic for everyone to remember".

Mr McGrath said he had an open mind on the reduction of the discharge period for bankruptcy “but it should not be the solution of choice for tens of thousands of people in mortgage arrears”, because bankruptcy was a serious measure with significant consequences for those involved.

Mr McGrath asked the Minister if the Government had a particular initiative underway to analyse the impact of a reduction in the term from 12 to three years and if there was a target date for its completion.

Mr Noonan said: “We are not working to a particular timeline, but we are collecting the relevant data.”

The Minister also stressed the need to separate bankruptcy from mortgage restructuring.

“By mixing both issues one could end up making a decision which would not be helpful.”

He said that if there were merits in reducing the term of bankruptcy from three years to one as was the case in other jurisdictions, “that is a separate policy consideration from resolving the mortgage crisis”.