The Minister for Justice, Frances Fitzgerald, is set to bring legislation to Cabinet tomorrow to reduce the term of bankruptcy to one year. Ms Fitzgerald is to accept a bill by Labour TD Willie Penrose to cut the three-year regime to one year.
A final draft of the legislation was being discussed this week between the departments of justice and finance. Sources said there was full agreement on reducing the bankruptcy term to one year. The final discussions were about the terms under which people would exit bankruptcy, to ensure that creditors were not overly disadvantaged.
At the moment people who exit bankruptcy are often subject to income payments orders for a period of up to five years afterwards, meaning that if their income rises above an agreed amount, creditors will get some of the benefit. Discussions are underway on this and provided agreement is reached in time, the proposal will go to Cabinet on Tuesday.
The proposals by the Minister are aimed at ending bankruptcy tourism under which many Irish people have gone abroad, particularly to the UK, and been declared bankrupt there. The new legislation would bring Ireland in line with the United Kingdom. It has been signalled for some weeks that it would be brought to cabinet with a view to getting the legislation in place before the end of the year.
Ms Fitzgerald will also significantly increase the penalties for those who hide assets or income from their debtors.Under the new provisions a person found to be concealing their assets could face an increased term of 15 years in bankruptcy from the proposed one-year term.
The law currently states the bankruptcy term could be increased from three years to eight if the person is found to be hiding assets. Ms Fitzgerald’s memo will also allow for an 18-month bankruptcy discharge for those already in the process more than a year.
The initiative was first proposed by Mr Penrose and backed by the Labour parliamentary party.
Resistance
However, it was met with resistance from the Department of Finance and did not feature in the Government’s mortgage arrears package announced earlier this year.
Mr Penrose said: “This is critical. The current situation where it is three years’ bankruptcy here and one year north of the Border is rather silly and impractical.
“This is something the Labour Party has supported and called for and I am pleased to see it will now happen.
“I have been contacted by people from all over the country about this. It will make a huge difference to people.”
The Department of Justice asked the Oireachtas committee on justice to examine the issue and to seek submissions from various parties.
The committee, chaired by Fine Gael TD David Stanton, reported to the Minister on July 8th and recommended a one year term. As reported earlier this month, the plan has been to get the legislation through before the end of the year.
