# My draft  submission



## Brendan Burgess (13 Jun 2015)

*Submission from Brendan Burgess on reducing the bankruptcy term*

*17th June 2015 *

*Background *

I am a consumer advocate and founder of the consumer forum askaboutmoney.com. I have a particular interest in mortgages and mortgage arrears. I chaired the Consumer Panel of the Financial Regulator from 2004 to 2007. I was a member of the Expert Group on Mortgage Arrears – The Cooney Group. Askaboutmoney.com has a variety of forums on personal financial issues including:

Mortgage arrears & negative equity case studies

*Personal Insolvency, bankruptcy, etc*
*Mortgage arrears - policy issues*
*Issues arising from joint mortgages*
My main concern is how bankruptcy affects the small borrower, and their home in particular.

While this is a personal submission, and these are my own views, some of the ideas have come from the contributors to askaboutmoney.com and in particular from the first-hand experience of people who are currently going through the bankruptcy process.

*Summary of recommendations *

Leave the default term for bankruptcy at 3 years.

The Official Assignee should be given the right to apply to the High Court to discharge the bankrupt earlier where the bankrupt has cooperated and where there is nothing further to be gained by waiting for three years.

When applying for an Income Payments Order, the Official Assignee should give consideration to the behaviour of the bankrupt prior to being adjudicated bankrupt and the extent to which they had cut back their expenditure to the equivalent of the Reasonable Living Guidelines.



*The bankruptcy period should be no longer than that necessary to allow the Official Assignee to quickly and efficiently deal with the assets and liabilities of the bankrupt. *

Bankruptcy should not be seen as a penalty. It should not be regarded as similar to a criminal conviction where the sentence should be appropriate to the crime.

The sole determinant of the term should be the time taken for the Official Assignee to sort out the assets and liabilities of the bankrupt. This will be determined by the size and complexity of the bankrupt’s affairs and by the co-operation of the bankrupt.

That could 3 months where there are no assets and only unsecured creditors or it could be 6 years where the bankrupt does not cooperate.

The default term should be three years, but the legislation should be changed so that the Official Assignee has the right to apply to discharge the bankrupt earlier. Alternatively, the default term could be one year, with the Official Assignee having the right to apply to extend it. However the former would result in fewer court appearances.

The Official Assignee's job is a lot simpler when there is no property and there are only unsecured creditors. A borrower facing bankruptcy may well reach agreement with their lender prior to bankruptcy to dispose of all secured assets, thus making the bankruptcy simpler and shorter for everyone.


Leaving the duration at the discretion of the Official Assignee would encourage people to behave responsibly. If a borrower were to quit their job to reduce their income or if they were to dissipate their assets prior to bankruptcy, the Official Assignee would take that into consideration. 

There is a danger in reducing the bankruptcy period to a fixed one year, that people may game the system as the term is so short.



*The duration and amount of the Income Payments Order are more important than the term of the bankruptcy *

The main restrictions of bankruptcy have little impact on most people. They don’t want to be company directors or auditors. They don’t want to be public representatives. Unless they are a member of a particular profession, their employment or trade will not be affected.

The duration of bankruptcy does not seem to be a factor in whether or not a person retains their family home.

What affects people much more is that they must live within the Insolvency Service’s Reasonable Living Expenses for 4 or 5 years.

While living within the Reasonable Living Expenses for 5 years might be considered to be an appropriate price to pay for having one’s debts wiped out, it must be remembered that anyone going bankrupt, has probably been living on the breadline for a number of years before bankruptcy.

Typically a home owner who loses their job will struggle for around 5 years trying to keep their family home before they opt for bankruptcy. If they then face an Income Payments Order for 4 years, they will be living a meagre life for a total of 9 years.  That is a huge chunk out of anyone’s life. In most cases, this is happening while they are raising children.

The maximum period anyone would have to live on the equivalent of the Reasonable Living Expenses should be five years, including the period prior to bankruptcy. Where a borrower has been struggling for some years before bankruptcy, the Official Assignee should not seek an Income Payments Order which would oblige the person to live a further period on the Reasonable Living Expenses.

Of course, a very high earner should not be allowed to enjoy their full income after a short bankruptcy term.  So it might be better to have the ordinary Reasonable Living Expenses for a total of 5 years, followed by a period where the RLEs are doubled. This would not affect most people. But if someone were earning €200,000 a year, they would live on twice the  RLEs and pass the surplus to their creditors.


*Reducing the Bankruptcy/IPO term is unlikely to change the behaviour of mortgage lenders *

One of the arguments used in favour of reducing the bankruptcy term is that it “would put manners on the banks” and make them more flexible in dealing with mortgage holders. There doesn’t seem to be any merit in this argument.

In some circumstances, bankruptcy may be beneficial to both the borrower and the mortgage lender in that it wipes out the borrower’s obligations to their unsecured creditors and so leaves more money available to pay the mortgage lender. So making bankruptcy easier, may help keep people in their homes. But it will be at the expense of other creditors and not at the expense of the mortgage lender.

While most people want to retain their family home, many are happy to get rid of it, if it means getting rid of the associated mortgage as well. Making bankruptcy less onerous, will encourage a lot of people with unsustainable mortgages to take the bankruptcy option much earlier. Again, this probably suits the lenders as much as it suits the mortgage holders.

It should be borne in mind that the current widespread existence of deep negative equity is unusual and will not persist forever. With house prices recovering and with more conservative lending, it will probably be rare in a few years’ time to find a borrower in deep negative equity. It’s important to design legislation for the long term and not just for today’s problem.




*Scenario 1 - Unsecured debts only.  Reducing the term would be of great benefit to the borrower. *









The ideal solution for this borrower and his creditors is that they realise that the debt is not sustainable. The lender should write off the mortgage shortfall. The credit union should realise that the debt will not be repaid and should write it off.

There should be no need for a Debt Settlement Arrangement. However, if the credit union does not agree to write off their debt, the lender should propose a DSA and use their majority as an unsecured creditor to write off all unsecured debt instantly. There should be no need for a 5 year workout.

If the mortgage lender does not agree, then the borrower should go bankrupt. There is nothing to be gained by a three year bankruptcy and a 5 year Income Payments Order.

The Official Assignee would advise the court that there is no purpose to be served by extending the bankruptcy period and that that the bankrupt should be immediately discharged. Of course, a creditor would be able to object if they had grounds for objection.



*Scenario 2 - Home owners with unsustainable mortgages. Reducing the term would help them face up to reality earlier.*






This is the same as Example 1, except that the home has not been sold yet. The lender and the borrower should agree to a voluntary sale as part of a Personal Insolvency Arrangement. If the lender does not agree, then the borrower should be able to go for bankruptcy and get a fresh start immediately.

Reducing the term would allow borrowers face up to the reality that their mortgage is unsustainable a lot earlier. The threat of a short term bankruptcy would make the mortgage lender and the unsecured creditors much more likely to negotiate a write-down of debt without the need for a PIA or bankruptcy.

*Scenario 3 * *Sustainable mortgage but unsustainable other creditors
Reducing the bankruptcy term will help people to retain occupation of the family home where getting rid of the unsecured creditors will help make the mortgage sustainable *

Case Study 3






In this case, the mortgage would be sustainable if the borrower were not under pressure from the business creditors.


By going bankrupt, the home will vest in the Official Assignee. If the bankrupt is able to meet the mortgage repayments, the mortgage lender will be happy to leave the property in the name of the OA and so the borrower gets to retain occupation of the family home. Of course, the bankrupt loses legal ownership of it, but could regain legal ownership if their financial situation improves in time.


This would happen under a three year bankruptcy term as well. So it might be argued that shortening the term would make no difference.

Shortening the term makes bankruptcy more attractive to the debtor. It means that they can get the stigma of bankruptcy removed much sooner.  A three year term with a potential further 5 years of an income payments order is daunting. The possibility of a shorter term would make it a more attractive option


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## breadandjam (24 Jun 2015)

Hi Brendan, there's excellent work in this and I am sure the many people who are in this situation and who read this forum will appreciate the work you are doing on their behalf.

Right now, I am in the UK, about 90 days from being able to declare bankruptcy here. Would I come back and declare in Ireland? Not have to sunder from friends family and where I have lived my whole life to take this new proposed bankruptcy model?

No, and I'll explain why. It still gives all the power to the creditors. They control when you are released, so I will assume it will still be 3 years plus 5. Even though I have been scrupulously honest and as I said before sold my home and liquidated my business to give every cent I can. That will not be enough. They will want to keep squeezing my income for as long as possible. It is simple economics. I can give them more so they will take more. The effect on me, my family or the Irish economy is irrelevant. That's capitalism. Say €1,000 per month for 8 years, that's €96,000 why would they walk away from that?

So no, I will stay in the UK 2 more months, then even if I get a UK IPA/IPO based on my low income over here, I'll still be free 5 years sooner.

I think at the very least, we have to mirror how it is done in the UK. Having to move to the UK because of the regime in Ireland makes me an economic refugee, not a tourist. Using the UK bankruptcy system is possible thanks to EU law. It is not "gaming the system". The system is gaming us, we're just not playing by their rules. Just offering the perspective of someone in this situation.


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## Brendan Burgess (24 Jun 2015)

Hi b&J

Some very interesting points there. 

I think that the Committee would welcome your input. Do you plan to make a submission? 

Brendan


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## breadandjam (24 Jun 2015)

Hi Brendan,

I very much wanted to, and I planned to, but they don't allow anonymous submissions and I don't want to become a target or a public figure. I don't feel shame or guilt about my situation any more, but there are plenty of judgemental people out there. And I would expect it would just make me a bigger target for my creditors. I would prefer to protect me, my family and friends. I'm not out of the woods yet, and I aim to be, anonymity is my best friend even though I would love to speak up more and help others in my situation and on the same road.


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## Brendan Burgess (24 Jun 2015)

Hi B&J

I contacted the Clerk of the Committee who sent me the following reply.  

Brendan 

Dear Brendan,

The reason for excluding anonymous submissions is that the Committee would not be in a position to verify or clarify the information provided.  

I can assure you, that it is not the Committee's intention to create any difficulties or put private/personal information into the public domain.

For this reason, the invitation was carefully worded  as follows:

"In a *separate* document from your electronic submission, please include a covering letter outlining in brief why you are making a submission. The covering letter should include your name, your postal address, email address and contact telephone number. "

This would allow the Committee to publish the attachment containing the submission with all the relevant details and not publish the *separate* attachment covering letter containing personal contact details.

I hope this has clarified the appropriate method of making a submission, however, if you require any further clarification, please do not hesitate to contact me.

Kind Regards

Alan


Alan Guidon
Clerk to the Committee
Joint Committee on Justice, Defence and Equality


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## Brendan Burgess (24 Jun 2015)

So you can make a submission in a Word document which would be anonymous.

Then attach it to an email with your personal details.

Brendan


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## Matthew Moore (24 Jun 2015)

breadandjam said:


> No, and I'll explain why. It still gives all the power to the creditors. They control when you are released, so I will assume it will still be 3 years plus 5.  Say €1,000 per month for 8 years, that's €96,000 why would they walk away from that?
> So no, I will stay in the UK 2 more months, then even if I get a UK IPA/IPO based on my low income over here, I'll still be free 5 years sooner.



The Official Assignee is on record stating that he will only seek and IPA/IPO for 4 years from cooperating borrowers. Your creditors have no input in this matter. Furthermore, I can confirm that he will seek the IPA within weeks of being adjudicated. This leaves the total duration of bankruptcy and Income agreements for cooperating bankrupts 3 and 4 years in England and Ireland respectively. Still too long but not the 8 years that many assume it will be.

I feel we shouldn't get too caught up in keeping these matters anonymous. The more it is spoken about in public then the more the stigma will be broken down.


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## epicaricacy (24 Jun 2015)

breadandjam said:


> Hi Brendan, there's excellent work in this and I am sure the many people who are in this situation and who read this forum will appreciate the work you are doing on their behalf.
> 
> Right now, I am in the UK, about 60 days from being able to declare bankruptcy here. Would I come back and declare in Ireland? Not have to sunder from friends family and where I have lived my whole life to take this new proposed bankruptcy model?
> 
> ...



Hi Bread and Jam

Talk to your UK insolvency specialist re. avoiding an IPA / IPO. Start to think strategically now to ensure that your outgoings and your income match as a £20 surplus can lead to the dreaded IPO being attached for 3 years.

The worst aspect of the IPA / IPO is that they track your income as it rises and falls. In addition, they will hoover up any inheritance or other windfall that you may acquire.

There is little point in moving to the UK if one is to be landed with a 3 year IPA / IPO in addition to the 6 month COMI period as most Irish IPAs / IPOs will only last 4 years in practice.

In other words you would have moved to the UK to save 6 months in total if an IPA is attached. The 8 year (5+3) idea is a myth peddled by certain English / Scottish insolvency practitioners to drum up business. The whole point in moving to the UK is to reduce the bankruptcy period to 18 months = 6 month COMI + 12 month discharge period.

Avoid all overtime, permanent full-time work etc. from here on in and make an appointment with your insolvency specialist ASAP to work out the best way to avoid an IPA / IPO.

If you can't afford an insolvency specialist, James Falla on beatmydebt.com offers a live messaging service.


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## breadandjam (24 Jun 2015)

Thanks Brendan, it was really good of you to follow that up and seek clarification from the Clerk of the Committee. Some people will be happier I am sure to submit something, but I think Ireland is too small and the information will still get out. I'm just trying to protect my family. 

Have you seen one story in the press where someone who was going through bankruptcy was presented in a sympathetic light? An ordinary, decent man with a family? Everyone they choose to write stories about is not an everyman. Ivan Yates? The O'Donnells? Sean Quinn? David Drumm? NAMA Developers? Notice a pattern? They are all presented as crooked, rich etc. What they are really like is not the point, they are the ones the press chooses to write about, or are told to write about. The point is I don't see any representations of ordinary people like me going through this, so I seriously doubt it is in my best interest to even risk going public. "Verify or clarify the information provided?" sounds a bit spurious to me.


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## Brendan Burgess (24 Jun 2015)

Hi breadandjam

If you want to tell your story to a national newspaper I think I could arrange that.   The journalist would likely be sympathetic. But anyone can post online and some will criticise you. 

Brendan


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## breadandjam (24 Jun 2015)

Thank you Epi, your posts are great too by the way!

I am totally in agreement with you on the IPA/IPO risk. Thank you for your advice.

It is not all about money though. Another major advantage of the UK system is how little exposure to the court you have. As an honest person who has never been in trouble with the law, the Irish system makes you feel like a criminal, the UK system is just a way to get a business person able to do business again. IN the UK, you have one brief visit to outer chambers and that's it. No more.

In Ireland the system is designed to serve the creditors, in the UK the debtors as I said. I have no faith in the system here are all because it was faith in the system that got me into this.

There is no consistency in views about how long your income can be taken from you so I have to play it safe. You would imagine it would be simple and clear. The numbers of people declaring in the UK versus Ireland is not down to good marketing by Insolvency Practitioners. It is down to the stigma and how invasive it is as a process in Ireland.

I would rather take my chances in the UK. Without any real figures from real people about how long they have paid for. It is still too soon to say.




Brendan Burgess said:


> Hi breadandjam
> 
> If you want to tell your story to a national newspaper I think I could arrange that.   The journalist would likely be sympathetic. But anyone can post online and some will criticise you.
> 
> Brendan



Hi Brendan, Maybe when this is all over I could tell the full story. Until it is over, I don't have the full picture and still feel vulnerable.



pat2 said:


> The Official Assignee is on record stating that he will only seek and IPA/IPO for 4 years from cooperating borrowers. Your creditors have no input in this matter. Furthermore, I can confirm that he will seek the IPA within weeks of being adjudicated. This leaves the total duration of bankruptcy and Income agreements for cooperating bankrupts 3 and 4 years in England and Ireland respectively. Still too long but not the 8 years that many assume it will be.
> 
> I feel we shouldn't get too caught up in keeping these matters anonymous. The more it is spoken about in public then the more the stigma will be broken down.



Hi Pat2,

Who defines "cooperating" borrowers? It would be very easy I would say to deem someone "non-cooperating". One year shorter in hell is a lot. A year of birthdays, a Christmas? As I get older a year looks like a precious amount of time that I am rapidly running out of.

I actually think there should be no IPA/IPOs at all. I have give up my home, my business, everything I have. I think that should be enough.

When this is all over I'll share more, right now I want not to be known. I've been lurking on this forum for months and only finally felt I had to say something because while this Committee is a chance to influence some change.


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## breadandjam (24 Jun 2015)

Thanks you everyone, I'm going back to lurking. 

I just wanted to say that I think that if we really wanted to be progressive and radical with this committee, we would say we have to allow people to sell their assets, clear all their debts and start again. No IPA/IPO, no stigma. Simple as that. No 1, 2 3, 5 whatever years. Yes, they/we have to surrender everything they/we have, but that will mean people will only do it who have to do it. But then they get a fresh start. The whole country needs this. 

Greece is just realising there's no point negotiating when the only power you have is to walk away from the table and your opponent knows it. Take the pain and recover, don't drag out the suffering to another generation or more.

Our economy is stagnating because of this short sighted thinking: keep paying and they will be nice to us. How is that working out? We are already back to the "tighten our belts" 80's. We need a radical change of government and laws to change the system. This committee will not make any radical changes, just complicate and muddy the waters ever further. Keep placating those with the power.

Fair play to you Brendan, you are actually walking the walk not just talking the talk, like me. 

Just remember, in who's interest is it really to keep someone paying 20/100 a month? It is to stop the thousands of others doing it. That's all this committee will amount to I fear: more confusion and more people just going across the water for an English solution to an Irish problem.


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## epicaricacy (24 Jun 2015)

Hi Bread and Jam

I fully agree with you about the differences between the 2 jurisdictions - that is why I chose the UK route.

I just want to repeat the IPO / IPA advice as my wife and I were so caught up in trying to survive in the UK that we sometimes lost sight of why we were there. The 12 month discharge period is purgatorial enough without having it elongated by 3 years at any time from the date of being adjudicated bankrupt to the date of discharge. 

If one is fortunate enough to avoid an IPA / IPO after the telephone call with the Official Receiver, he / she will send an Income Payment Order Questionnaire to your Irish address (presuming you return home) at some point during the 12 months of being an undischarged bankrupt. It's wise to maintain your focus re. your income and outgoings throughout.

I wouldn't advise revealing your identity prior to being discharged from bankruptcy!!

Good luck!!


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## breadandjam (24 Jun 2015)

epicaricacy said:


> Hi Bread and Jam
> 
> I fully agree with you about the differences between the 2 jurisdictions - that is why I chose the UK route.
> 
> ...



And the very best of luck to you in everything, thanks again all.


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## Matthew Moore (24 Jun 2015)

breadandjam said:


> Thanks Brendan, it was really good of you to follow that up and seek clarification from the Clerk of the Committee. Some people will be happier I am sure to submit something, but I think Ireland is too small and the information will still get out. I'm just trying to protect my family.
> 
> Have you seen one story in the press where someone who was going through bankruptcy was presented in a sympathetic light? An ordinary, decent man with a family? Everyone they choose to write stories about is not an everyman. Ivan Yates? The O'Donnells? Sean Quinn? David Drumm? NAMA Developers? Notice a pattern? They are all presented as crooked, rich etc. What they are really like is not the point, they are the ones the press chooses to write about, or are told to write about. The point is I don't see any representations of ordinary people like me going through this, so I seriously doubt it is in my best interest to even risk going public. "Verify or clarify the information provided?" sounds a bit spurious to me.



I too had to think long and hard about going public with it and ultimately decided I would. My thinking is that, in future business, anybody who wants to find out about my financial woes will, regardless of how public or not I have been, and that goes for the UK and Ireland. For any Joe Bloggs outside of business who is judgmental, feck them. I'll happily have a good debate with them about it. As they say 'you weren't there....man!'. 
I will use this time to make some major changes in my life. If it comes up in the future I'll gladly describe how it gave me an opportunity to get my life together and I (hopefully) came out of it better than I went in. If people chose to avoid or judge me, on a personal or business level, so be it, I won't be losing any sleep over it. Have a look at my blog if you have a chance, haven't given it enough time but I'll get stuck into it soon. https://forbetterorbankrupt.wordpress.com/


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## Matthew Moore (24 Jun 2015)

breadandjam said:


> Hi Pat2,
> 
> Who defines "cooperating" borrowers? It would be very easy I would say to deem someone "non-cooperating".



I don't agree. If the OA wishes to extend the IPO 5 years after bankruptcy he must get a court order so ultimately it would be the court who decides whether you were non-cooperating. If you have not hid assets or income then you would have nothing to fear. There is also an allowance in the legislation to extend the actual bankruptcy to 8 years, again, this is a matter for the courts to decide.


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## Matthew Moore (24 Jun 2015)

breadandjam said:


> It is not all about money though. Another major advantage of the UK system is how little exposure to the court you have. As an honest person who has never been in trouble with the law, the Irish system makes you feel like a criminal



I have been through the Irish system and I can say that at no point was I made feel like a criminal. The judge on the day of adjudication was very compassionate and dealt with bankrupts in a very clear and fair manner. I was waiting about 15 minutes for my case to be called and when it was it was over in less than a minute. In most cases the IPA is dealt with over the phone but I decided I would like to meet with them and they were very accommodating, explaining the process from start to finish.


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## Brendan Burgess (24 Jun 2015)

pat2 said:


> I too had to think long and hard about going public with it and ultimately decided I would.



Hi pat

Have you made a submission ?  It's closing tomorrow Thursday . 

Brendan


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## Matthew Moore (24 Jun 2015)

Brendan Burgess said:


> Hi pat
> 
> Have you made a submission ?  It's closing tomorrow Thursday .
> 
> Brendan



Hi Brendan,

Yes, I have a submission ready to go, haven't submitted it yet. The extension is until Friday 26th I believe, unless it's changed again. I'm a little concerned that my submission is too personal and not academic at all. I would have loved to be able to back up some of my points with references but haven't had a chance. I've never done anything like this before so I hope it not viewed as a biased bankrupt. They requested that you indicate on your cover letter if you would be willing to speak to the committee directly. I said yes, I would gladly speak to them if they want to speak to someone going through the system.

I suppose my main points are that:

1 year bankruptcy and 3 year IPA/IPO which should run no later than the 3rd year anniversary of adjudication.
Should be rehabilitative in nature and no punitive element.

The OA should be allowed no discretion as to when one is discharged. Any extensions or shortening should be court approved.
Debt to income ratio should have no bearing on discharge period. Same should apply to everybody.
Current Reasonable Living Expenses are practically identical to the level of Social Welfare payments one would receive if not working. With creditor approval, in the current system, these levels can be raised. This should be possible without creditor approval and possibly a 60/40 spilt to OA/Bankrupt for any excess income. This would provide an incentive to work but also mean that people do not fall out of their careers.
1 year may mean that banks are willing to offer (continued) forbearance to mortgage holders on the PPR. If they emerge debt free in 1 year with a capacity to service the mortgage in full then this may suit both parties. Expecting forbearance for (a further) 3 years is a big ask.
Despite my above point, bankruptcy should not be seen as a way to keep people in their homes. If they do then that is a bonus. Ultimately, it should be seen as a way of returning once credit worthy and productive members of society back to a position of economic normality, so much so that they may be in a position to buy a house again. I see little advantage to prolonging this process.
I've elaborated on the points in my submission and included more personal information but that is the gist of it.


Do you have any idea when they will conclude their consideration. I note that the ISI and OA have been up there already.


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## Brendan Burgess (24 Jun 2015)

pat2 said:


> I'm a little concerned that my submission is too personal and not academic at all. I would have loved to be able to back up some of my points with references but haven't had a chance.



Hi Pat

They will get plenty of academic submissions.  Your personal experience will complement them very well.

Brendan


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## Matthew Moore (24 Jun 2015)

Brendan Burgess said:


> Hi Pat
> 
> They will get plenty of academic submissions.  Your personal experience will complement them very well.
> 
> Brendan



Thanks Brendan, I hope so. It's a fantastic opportunity to have some input, however minute. 

One way or the other, I hope it is concluded soon. The uncertainty around the term has been generally unhelpful, especially the back and forth of the early exchanges between the two parties in government. They should have dealt with this matter with much more sensitivity at the start. At least now there is some structure to the process.


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