Labour bid to reduce bankruptcy term receives backing from justice committee
LABOUR'S bid to reduce the term of bankruptcy to one year has received a major boost with the Oireachtas Justice Committee backing the move.
Tanaiste Joan Burton’s party has been fighting for bankruptcy to be reduced from the current three year period in an effort to give people with distressed mortgages more bargaining power with banks.
But Labour has been met with strong opposition from their Coalition partners in Fine Gael.
However, the all-party Justice Committee review of the bankruptcy term today recommended reducing it to one year but retaining the option of increasing it to three years in certain situations.
This could include when there is excessive unsecured debt opposed to mortgages or business debt, or when there is a failure to cooperate with creditors by those heading for bankruptcy.
Labour TD Willie Penrose, who has consistently pushed for the term to be reduced to one year, welcomed the report and said he hoped it would now progress into law.
“Although this reduction might be of some small assistance in helping a person in mortgage arrears, insofar as it might give greater bargaining power, the main point of reducing the discharge period is to focus upon the significant and unsustainable debt levels, which people and businesses of all types are lumbered with,” Mr Penrose said.
He said the reduced period would also end “bankruptcy tourism”, which sees Irish people in financial trouble move to the UK to avail of more favourable bankruptcy conditions.
Justice Committee chairman David Stanley said bankruptcy should not be used as a “quick fix” solution for someone in financial difficulties to the detriment of their creditors
However, he added: “the committee believes that this issue should be kept under constant review and believes that the mechanism of bankruptcy should aid recovery in the fairest possible way, but not excessively punish the debtor.”