Bankruptcy in Ireland 2014
Bankruptcy – Part 4, Personal Insolvency Act 2012
The Personal Insolvency Act, 2012 provides for a number of amendments to the Bankruptcy Act 1988 to provide for a more enlightened, less punitive and less costly approach to bankruptcy. To be eligible to petition the Court for Bankruptcy an individual must be in a position to prove that a Debt Settlement Arrangement or Personal Insolvency Arrangement is not possible. This must be completed by way of a certificate from a Personal Insolvency Practitioner. The Personal Insolvency Practitioner cannot issue Bankruptcy proceedings on your behalf unless they are also Solicitors. Personal Insolvency Practitioners do not hold a right of Audience before the Circuit Court or High Court unless complimented with an appropriate legal qualification. John Neville of John Neville and Company as an individual who is authorized by the Insolvency Service of Ireland as a Personal Insolvency Practitioner and also authorized by the Law Society of Ireland to practice as a Solicitor can deal with all matters on your behalf without the need for individuals to have to seek advice from different professionals and thus allow for a costs saving to individual clients.
The Effect of Bankruptcy on the Bankrupt Person
A) Loses ownership of his or her assets
B) Must file a statement of affairs setting out assets and liabilities
C) Must co-operate with the Official Assignee of the High Court
D) Name is placeed on bankruptcy register & bankruptcy advertised by public notice
E) Property disposals prior to bankruptcy may become the subject of investigations by the Official Assignee
F) The Family home can be disposed by the Official Assignee, but not without the sanction of the High Court. This asset would be considered to be the asset of last resort by the office of the Official Assignee.
G) Cannot act as a Company Director, cannot hold elected representative office
H) Can be summoned for examination before Court
I) Cannot obtain credit above €650 without disclosure to Official Assignee
J) Pensions – Exempt other than ARF, the Official Assignee can exercise an option to convert income options before, at or 5 years after Adjudication as a Bankrupt. Excessive pension contributions made within 3 years of adjudication can be clawed back by the Official Assignee
K) During the period of Bankruptcy the
apply.
L) Official Assignee may make Income Payment Orders for up to a time period of 5 years. This may commence during the period of bankruptcy if an individuals circumstances change.
The main new provisions are as follows:
Bankruptcy Summons:
(a) The new minimum amount for a creditor or combined non-partner creditor’s petition for bankruptcy is €20,000. (The current limits are €1,900 for a creditor and €1,300 for combined non-partner creditors).
(b) Fourteen days notice must be provided to ensure that a bankruptcy summons is not brought prematurely by a creditor, so as to allow the debtor to consider other options such as a Debt Settlement Arrangement or a Personal Insolvency Arrangement.
Bankruptcy Petition
a) Creditor Petition
(i) The creditor must prove for a debt of more than €20,000 (the current limit is €1,900).
(ii) The Court will be required to consider the assets and liabilities of the debtor and assess whether it may be appropriate to adjourn proceedings to allow the debtor to attempt to enter into a Debt Settlement Arrangement or Personal Insolvency Arrangement
b) Debtor Petition
(i) Debtor must swear an affidavit that he/she has made reasonable efforts to make use of alternatives to bankruptcy, such as a Debt Settlement Arrangement or Personal Insolvency Arrangement and
(ii) Present a Statement of Affairs, which must disclose that his/her debts exceed his/her assets by more than €20,000.
Excepted assets
The maximum value of household furniture or tools or equipment required by a bankrupt for a trade or occupation is increased from the current level of €3,100 to €6,000. The Official Assignee will not seize excepted articles, up to the €6,000 threshold allowed.
Similar to DRNs, DSAs and PIAs, it provides that any asset of a bankrupt in a relevant pension scheme {i.e most pensions other than Approved Retirement Funds (ARFs)} shall not vest in the Official Assignee or PIP. However, where the bankrupt would have received before or at date of adjudication or up to 5 years thereafter, any income or any other sum of money from the relevant pension scheme, by performing an act or exercising an option, then the Official Assignee or PIP may perform the act or exercise the option to vest the funds in him or her, for distribution thereof to creditors of bankrupt. The Court, on application by the Official Assignee, PIP or a creditor, if it is satisfied that the bankrupt has in 3 years preceding the adjudication order made excessive pension contributions to a relevant pension arrangement; may direct that such part of the contribution shall be paid to the Official Assignee or PIP for distribution to bankrupt’s creditors.
Avoidance Procedures in Bankruptcy Act Amendments
(i) Avoidance of fraudulent preferences and certain transactions made before adjudication in bankruptcy: the current time period of 1 year is extended to 3 years – S 57 Bankruptcy Act.
(ii) Avoidance of transactions at an under value made before adjudication in bankruptcy: the current time period of 1 year is extended to 3 years –
(iii) Avoidance of certain settlements made before adjudication in bankruptcy: the current time periods in regard to certain voluntary settlements of property is extended from 2 years to 3 years – S 59 Bankruptcy Act.
Discharge from Bankruptcy
The following new provisions will apply:
(i) The automatic discharge from bankruptcy period is reduced from 12 years to 3 years.
(ii) Bankruptcies existing for 3 years or more at the time of commencement of the Act will be automatically discharged after a further six months have elapsed, this latter time to allow for any creditor objection.
(iii) The bankrupt’s unrealised property will remain vested in the Official Assignee in Bankruptcy after discharge from bankruptcy and the discharged bankrupt will be under a duty to co-operate with the Official Assignee in the realisation and distribution of such of his or her property as is vested in the Official Assignee.
(iv) The Official Assignee, PIP or a creditor may apply to the Court to object to the discharge of a person from bankruptcy. The grounds for such an objection are that the debtor has failed to co-operate with the Official Assignee or PIP or has hidden or failed to disclose income or assets. The Court may suspend the discharge pending further investigation or extend the period before discharge of the bankrupt, up to a maximum of 8 years from the date of adjudication.
Income Payment Orders / Agreements
The Court may order a bankrupt to make payments from his or her income or other assets to the Official Assignee or PIP for the benefit of his or her creditors. In making such an order, the Court must have regard to the reasonable living expenses of the bankrupt and his or her family. The Court may vary a bankruptcy payment order where there has been a material change in the circumstances of the discharged bankrupt. Such an order must be applied for before the discharge from bankruptcy, may operate for no more than 5 years and if still in place will terminate automatically on 8th anniversary of adjudication order. In practice the Official Assignee concludes Income Payment Agreements with bankrupts in practically all cases, without requirement of a Court order and such agreements are subject to same time limits as income payment orders. It is obviously very much in a bankrupt’s interests to commence such an agreement at earliest possible date after his / her adjudication, to ensue 5 year period of payments terminates as soon after discharge as possible.
Bankruptcy Restrictions
There are no prohibitions contained in the Bankruptcy Act 1988 with regard to restrictions on the nature of employment or profession of a person adjudicated bankrupt. Such prohibitions, where they exist, are contained in sectoral legislation, e.g. in the Electoral Acts in regard to membership of Dáil Eireann or in contracts of employment, e.g. in the legal profession).