Bankruptcy is a settlement of the debts of someone who is wholly or partially unable to repay their debts. The purpose of the bankruptcy is to distribute your assets fairly among your creditors and protect you from these creditors. The distribution is done through a court official, the Official Assignee in Bankruptcy.
Several changes to the bankruptcy laws came into effect on 3 December 2013. The main changes are:
The Companies (Miscellaneous Provisions) Act 2013 was signed into law on 24 December 2013. Section 10 of the Act allows for a person who is adjudicated bankrupt to publish the notice of bankruptcy on the ISI’s website, free of charge, as an alternative to placing (and paying for) a newspaper advertisement. A notice in Iris Oifigiúil is still required.
A list of Bankruptcy Notices of Statutory Sittings will now appear on the ISI’s website.
If you are in serious financial difficulties, you may decide that declaring bankruptcy is the best solution for you. However, declaring bankruptcy can be an expensive option. The Money Advice and Budgeting Service (MABS) does not recommend taking this step unless you have given careful consideration to all available options and are sure that bankruptcy is the appropriate one for you.
A creditor can petition for bankruptcy against you if you have committed an act of bankruptcy within the previous 3 months. Examples of acts of bankruptcy are:
You can try to avoid bankruptcy by making a voluntary arrangement, if possible, with your creditors to settle your debts. MABS recommends that you should try to negotiate an affordable and sustainable arrangement with your creditors before considering bankruptcy.
You may be eligible for one of the 3 new debt resolution processes introduced under the Personal Insolvency Act 2012 – read more in our document on personal insolvency options.
Alternatively, you can apply for an arrangement under the protection of the High Court. This means that you ask the High Court for protection against proceedings to give you time to present a proposal to your creditors.
This proposal could be to pay them a dividend (usually a percentage) on your debts. Another option would be to transfer property to the Official Assignee to be sold and have the proceeds distributed among your creditors.
In order for such a proposal to succeed, it must get the support of specified majority of the unsecured creditors voting on it. (An unsecured creditor does not hold any security. Examples are trade creditors and holders of other business debts.)
The costs, court fees, expenses and debts to preferential creditors must also be paid in full. (A preferential creditor is a creditor whose debts have priority for payment before other creditors. These debts include taxes, rates and certain employee claims and benefits.)
All of your assets, with the exception of necessities up to a value of €6,000, are transferred to the Official Assignee, who will sell them. (This limit was €3,100 up to 3 December 2013.) Once your property is sold, the Official Assignee will pay costs, expenses, fees and certain priority debts (such as taxes) and distribute the remainder among your creditors.
You must lodge an initial €650 towards the costs of the Official Assignee and towards court and advertisement costs. Although only the assets that you own when you are made bankrupt are automatically transferred to the Official Assignee, assets that you acquire after that date (for example, through inheritance) may still be claimed by the Official Assignee and sold for the benefit of your creditors.
If you own a family home, by yourself or with another person, the Official Assignee may only sell it with the prior permission of the court. Where this permission is sought, the court will balance the interests of your creditors against the interests of your family and may decide to postpone the sale of your home.
If you hold property jointly (for example, with your spouse) your bankruptcy will cause the joint ownership to be split between the Official Assignee and your non-bankrupt co-owner. You are entitled to retain the following as 'excluded items' from bankruptcy to a value of €6,000 (was €3,100) although you may apply to the court to increase that figure:
The court can use your salary and/or pension for the benefit of your creditors, subject to any arrangements it may make to provide for your family responsibilities and your personal situation.
No deductions will be made from social welfare payments.
Once you have been declared bankrupt, you will be guilty of an offence if:
These offences carry a maximum penalty of 5 years in prison and a fine of €1,270.Other consequences of bankruptcy are:
With effect from 3 December 2013, the period for automatic discharge from bankruptcy has been reduced from 12 years to 3 years. Bankruptcies that were existing for 3 years or more on 3 December 2013 will be automatically discharged after a further 6 months have elapsed.
(The Civil Law (Miscellaneous Provisions) Act 2011 (Section 30) updated some of the rules on bankruptcy. Subsection 30(g) of the Act provided for the automatic discharge of a bankruptcy after 12 years. It also provided for a bankrupt to apply for a discharge after 5 years. This subsection came into force on 10 October 2011.)
You can also be discharged from bankruptcy if you meet certain conditions.
If your assets have been sold and all your costs, fees, expenses and preferential debts (such as certain tax debts) have been paid, it is possible for you to be discharged from bankruptcy even if you have not paid all of your debts.
You can be released from bankruptcy in any of the following ways:
When you are discharged from bankruptcy, any money or property remaining is returned to you (provided all the costs, court fees, expenses and preferential debts of bankruptcy are paid).
Bankruptcy can be expensive. Proceedings are taken in the High Court and will usually involve solicitors and barristers. If you are applying to be declared bankrupt, you must lodge an initial €650 towards the costs of the Official Assignee and towards court and advertisement costs.
You can either apply to the Examiner's Office of the High Court yourself or a creditor can apply to court to have you declared bankrupt. Bankruptcy proceedings may only be brought in the High Court.
If you wish to be discharged from bankruptcy, you also apply to the Examiner's Office.
While instructing a solicitor is not necessary, the ISI considers it advisable to get professional legal advice in advance of declaring yourself bankrupt or defending any bankruptcy proceedings.
The Irish Mortgage Holders Organisation (IMHO) provides a free service (excluding Official Assignee and court administration costs) in relation to bankruptcy.
If you have a question relating to this topic you can contact the Citizens Information Phone Service on 0761 07 4000 (Monday to Friday, 9am to 8pm) or you can visit your local Citizens Information Centre.