What is bankruptcy?
If you have debts over €20,000 and you are not able to repay them, bankruptcy may provide a way to settle your debts if the other personal insolvency options are not appropriate for your circumstances.
Bankruptcy distributes your assets among the creditors you owe money to and protects you from these creditors. The distribution is done through a court official, the Official Assignee in Bankruptcy, who is based in the Insolvency Service of Ireland (ISI) and manages its Bankruptcy Division.
Usually, after one year you will be discharged from bankruptcy and all of your debts will be written off.
Bankruptcy deals with both secured and unsecured debt.
A secured debt is a loan on which property or goods are available as security against non-payment. Mortgages and car loans are the most common secured loans.
Other debts are called unsecured debts, for example, utility bill arrears, credit card debt and bank overdrafts. However, if they are rolled up into your mortgage, they become secured loans.
Who can become bankrupt?
If you have debts over €20,000 and you cannot pay your debts in full when they are due, bankruptcy may be option for you.
You must first consider the 3 personal insolvency options. If none of these are suitable, you may decide that declaring bankruptcy is the best solution for you.
The ISI has published detailed information on bankruptcy, including a short guide to bankruptcy (pdf) a detailed Debtor’s Guide to Bankruptcy (pdf) and a set of Bankruptcy Scenarios (pdf). Its backontrack.ie website also has user-friendly information and guides on bankruptcy.
In some circumstances, the High Court can make you bankrupt at the request of a creditor. This request is made in a document called a petition. A creditor can petition for bankruptcy against you if you have committed an act of bankruptcy within the previous 3 months. This is known as a creditor’s petition.
Examples of acts of bankruptcy are:
- If you are served with a bankruptcy summons requesting payment of a specific sum and you fail to comply within 14 days
- If the sheriff or county registrar makes a return of 'no goods' when they are authorised to seize your belongings but find no goods to seize
The Personal Insolvency Act 2012 introduced two additional acts of bankruptcy:
- Where the debtor has been subject to a Debt Settlement Arrangement which has been terminated or which is deemed to have failed
- Where the debtor has been subject to a Personal Insolvency Arrangement which has been terminated or which has failed
The ISI has published information for creditors.
There are several steps you must take when you have decided to make yourself bankrupt. You are not required to have a solicitor to apply for bankruptcy but the ISI recommends that you do get legal advice before you declare bankruptcy or defend a legal action to make you bankrupt.
The process is summarised below:
- Pay a fee of €200 to the Official Assignee and email proof of the lodgement to the ISI Bankruptcy Division
- Complete your petition, which must be verified by a sworn affidavit and a sworn statement of affairs
- File the relevant bankruptcy application documents in the Examiner’s Office
- Attend the court hearing on the date given, where the judge will adjudicate you bankrupt if you meet the requirements
- Meet the Official Assignee or Bankruptcy Inspector to be interviewed about your assets and debts
- Place a notice of your adjudication as a bankrupt in Iris Oifigiúil (the State gazette) and on the ISI's website
What happens when you are declared bankrupt?
A Bankruptcy Inspector from the ISI will serve you with a copy of the Order of Adjudication (Bankruptcy Order) and Warrant of Seizure. The Inspector will also give you a Statement of Personal Information Form to complete, requesting various details, which the ISI will use to contact you and process your bankruptcy.
Your bank accounts will be frozen, except for one current account in which you can keep a balance of up to €1,000 for general living expenses.
The ISI will contact all financial institutions and inform them that you have been made bankrupt.
As soon as your bankruptcy starts, you are free of debt. The Official Assignee now owns your assets and administers your estate. Your creditors can no longer seek repayment directly from you. They must deal directly with the Official Assignee and all correspondence should be forwarded to him.
You must contribute any surplus income to the Official Assignee.
Your name will appear in the Bankruptcy Register, which is kept in the Office of the Examiner of the High Court. Anyone can check this register.
Read more in the ISI guide After you are made bankrupt (pdf).
The Official Assignee will negotiate an Income Payment Agreement or seek an Income Payment Order for the surplus of your income over the reasonable living expenses for your situation, based on the ISI’s guidelines. The agreement or order will last up to 3 years.
No deductions will be made from social welfare payments.
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.
You can keep essential assets up to a value of €6,000, but you can apply to the court to increase that figure. The assets may include:
- Furniture and tools or equipment relating to trade
- Necessities for your family and any dependent relatives living with you
Once your assets are sold, the Official Assignee will pay costs, expenses, fees and certain priority debts, such as taxes, and distribute the remainder among your creditors.
If you acquire assets after the date when you are made bankrupt (for example, through inheritance) the Official Assignee can claim them and sell them 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.
If the Official Assignee has not sold your home within 3 years, ownership may automatically transfer back to you, unless otherwise agreed.
Restrictions on people who have been declared bankrupt
Once you have been declared bankrupt, you will be guilty of an offence if:
- You do not disclose the bankruptcy when getting a loan or any other credit facility of €650 or more
- You do not disclose the bankruptcy if you trade under a different name to when you were made bankrupt
- You act as a director, manager, auditor, liquidator or receiver of a company without permission of the court
Other restrictions include that:
- You cannot be granted an enduring power of attorney on behalf of someone else, and if you hold one already, it is automatically revoked if you become bankrupt.
- Under the Charities Act 2009, you may not be a trustee of a charity if you are adjudicated bankrupt.
- Some professional bodies disqualify members who are adjudicated bankrupt.
- If you wish to travel outside the State, you should tell the Official Assignee. You may be arrested if it seems to the High Court that you are leaving the State in order to avoid the consequences of your bankruptcy.
The EU Insolvency Regulation aims to simplify formalities governing the reciprocal recognition and enforcement of judgments in cross-border insolvency matters.
The Regulation designates bankruptcy as an insolvency proceeding which can benefit from cross-border recognition. This means that a debtor availing of bankruptcy will gain the same protection against creditors in most other EU countries that they receive in Ireland, subject to the Regulation.
How long does bankruptcy last?
You are automatically discharged from bankruptcy 1 year after the order of adjudication. Your name will remain on the register, as a discharged bankrupt. If there is an Income Payment Agreement or an Income Payment Order in place, you will still have to comply with it until it expires. These arrangements can last up to 3 years.
This period could be shorter if you can come to a settlement with your creditors or could be longer if you do not fully co-operate or if you fail to disclose all of your property.
When applying to be declared bankrupt, you must pay €200 to the Official Assignee.
You do not need to pay stamp duty to the Courts Stamp office for the petition or for the sworn affidavit (incorporating a Statement of Affairs).
There is a fee for a Commissioner of Oaths to witness your sworn affidavit.
The cost of a notice in Irish Oifigiúil depends on its length.
There is no charge for advertising your bankruptcy on the ISI website.
Commercial rates apply if you place the advertisement in a national daily newspaper instead.
The cost of professional or legal advice can vary.