Irish Bankruptcy Laws by Annette J Dunlea
Published In The Carrigdhoun Newspaper p.11 30th April 2011
Bankruptcy is a process where the property or assets of an individual, who is unable or unwilling to pay their debts (called a debtor), is transferred to a person given charge of the property by the High Court (called a trustee) to be sold.When the property or assets are sold, the costs, expenses, court fees and certain priority debts are paid. After this, the net proceeds are distributed to those owed money (the creditors).The process of bankruptcy in Ireland is very much out of date in comparison with other countries such as the UK and as such the range of bankruptcy alternatives is limited.Bankruptcy is an option for any individual or company.The present Irish bankruptcy procedures are cumbersome and too costly to implement.It is an area in need of radical reform.However,the number of bankruptcies is increasing dramatically.
In bankruptcy cases, the Official Assignee in Bankruptcy, an officer of the Courts Service, is the trustee to whom this property is transferred. This is the person who administers the estate of bankrupt persons.Bankruptcy proceedings are brought in the High Court. The application for a bankruptcy order is filed in the Office of the Examiner of the High Court. Following this, the proceedings are dealt with by the High Court.The High Court makes a debtor bankrupt either at the request of a creditor or at his own request. In either case, this request is made in a document called a bankruptcy petition. This must be filed in the Office of the Examiner of the High Court.When the petition is filed, the petitioning creditor or debtor undertakes to the court to advertise notice of the bankruptcy in various newspapers. The advertisement must also contain details of the place, date and time of the next time this is before the court.The petitioner must also lodge €650.00 towards the costs and outlays of the bankruptcy in the Official Assignee’s Office and give an undertaking to the Official Assignee as to the further costs and outlays which may be incurred.A creditor may petition for bankruptcy against a debtor where the debtor has committed an act of bankruptcy within the previous three months.All property held by you when you are made bankrupt vests in the Official Assignee for the benefit of your creditors.The role of the Official Assignee is to sell or otherwise dispose of this property and distribute the proceeds to your creditors.
A bankruptcy proceeding has two aims:
1. To give the individual a fresh start by freeing them from the pressures of creditors
2. To ensure that all assets, like property and investments, are distributed fairly among the creditors.
Disadvantages
1. When bankrupt, you can’t apply for more credit.
2. It will cost you approximately €490 to declare yourself bankrupt.
3. If you own your own home, it might have to be sold
4. Some of your personal possessions might have to be sold, for example, its likely you will lose your car and any luxury items you own.
5. Many professions don’t let people who have been made bankrupt carry on working.
6. If you have a business, it’s more than likely that the Official Receiver will close down the business, dismiss your employees and sell off the assets.
7. Becoming bankrupt can affect you if you want to leave the country in the future.
8. Bankruptcy is not kept private. A list of bankrupt people is published on the internet and your case could also be published in your local newspaper.
9. When you are no longer bankrupt you could have another order, called a bankruptcy restriction order, made against you. These orders can be made, for example, where you did not co-operate with the Official Receiver, or you took on debts knowing that you had no hope of paying them back. They can last for 15 years and will make your financial affairs very restricted.
10. Bankruptcy can ruin your potential to run a business because you cannot trade under any other name.
11. A handful of bankruptcy cases are publically examined in court.
12. Your credit rating will be completely damaged for a long time, up to 6 years.
13. Student Loan debts will not be written off.
14. The Official Receiver may make you sell your most expensive and valuable assets.
15. You could lose your job and any chance of promotion.
16. You cannot be a director of a limited company.
17. If you are a professional, your status can be lost.
Advantages
1. Their is no more pressure as you don’t have deal with the creditors anymore.
2. You are allowed to keep certain items, such as household goods and a reasonable amount to live on.
3. You can make a fresh start one year after the bankruptcy order is over.
4. All the debts you owe can usually be written off.
5. After a bankruptcy order, most creditors have to call off any court action.
6. Many creditors have to stop tracking you for the owed debts and make their claim to the trustee instead.
7. It’s the opportunity for a financial start over.
8. No more dealing with creditors
Unlike in many other countries such as the UK and USA where bankruptcy legislation has been modernised to enable people with overwhelming debts to obtain access to the protection of the courts relatively easily, Ireland’s bankruptcy legislation is arguably out of date and in much need of modernisation.Because of the complexities of the current bankruptcy legislation in Ireland many people feel that obtaining a discharge from bankruptcy may realisticaly be complicated and as such prefer to deal with their debt problems without entering into the Irish bankruptcy process. Discharge form bankruptcy in Ireland can be achieved in a number of ways.It is worth noting however that enough funds must have been realised in the via the bankruptcy in order to cover the costs, fees, expenses and preferential debts arising in the bankruptcy.Where the bankruptcy has lasted for twelve years,the debtor’s property has been fully realised, and the court is satisfied that the debtor has disclosed any property acquired since bankruptcy and that it would be reasonable and proper to discharge the debtor from bankruptcy.Where the debtor’s creditors have been paid in full,together with such interest as the court allows.
The Law Reform Commission has published new proposed bankruptcy legislation.The Law Reform Commission’s Report is on Personal Debt Management and Debt Enforcement.The Commission’s 440 page Report makes 200 recommendations for reform, and also includes a draft Personal Insolvency Bill.Under Ireland’s Memorandum of understanding with the International Monetary Fund, new personal bankruptcy legislation must be passed by the first Quarter 2012. It is clear that the proposed legislation, if passed, will present much more option options to individuals facing bankruptcy.
The main recommendations in the Report are:
1. Debt Enforcement Office to oversee non-judicial debt settlement system
A small Debt Enforcement Office would oversee throughout the State the proposed new non-judicial debt settlement arrangements.
2. Two new processes: Debt Settlement Arrangement and Debt Relief Order
3. Proportionate and holistic debt enforcement mechanisms
4. Replacing outdated processes and abolishing imprisonment for debt
5. Judicial personal insolvency law: reform of the Bankruptcy Act 1988.
The main recommendations are:
1. automatic discharge from bankruptcy after 3 years, subject to: leaving the bankrupt’s full estate in the bankruptcy; and allowing the High Court’s Official Assignee in Bankruptcy to order the bankrupt make repayments for up to 5 years
2. increase from €1,900 to €50,000 the minimum debt level required to bring a creditor’s bankruptcy petition
3. significant reduction in number of priority debts in bankruptcy
4. introduce system for bankruptcy similar to the procedures for the restriction and disqualification of company directors
6. Regulation of debt collection undertakings
A licensing system would be introduced to regulate debt collection undertakings, which representative bodies in the sector have already supported. This would also put existing voluntary codes of practice on a statutory footing.The licensing system would also deal with unprofessional debt collection undertakings and debt collectors who engage in criminal acts such as harassment.The Commission considers that the regulation of debt collection undertakings should be seen in the wider context of the proposed regulation of money advisers which may form part of a Central Bank Reform Bill due to be published shortly. While money advice and debt collection involve different activities, they are closely connected and the Commission suggests one regulatory body should be responsible for both.
The End
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