It is a fact of modern life that many people are facing debt problems. Problems arise when you are unable to meet the monthly credit payments because of loss of a business, redundancy, shorter work hours, bereavement, divorce or separation. It may simply be that you have taken on too much credit and over extended yourself and creditors are threatening court action.
Whatever the reason, the pressure of being in debt can be over whelming. It can sometimes make you feel that you do not have control.
Kayanne Horgan Solicitor is a Personal Insolvency Practitioner and bankruptcy solicitor. We offer impartial and confidential advice to enable you to manage and reduce your debts. We will listen to your problems and offer you a solution that will allow you to get your finances back under control.
If you are in serious financial difficulties, you may decide that declaring bankruptcy is the best solution for you. However, careful consideration should be given to all available insolvency options to ensure that bankruptcy is the appropriate step for you.
What is Bankruptcy?
In order to be declared bankrupt, you must be insolvent, i.e. you are unable to pay your debts to creditors, in full, as they fall due. Your debts must exceed your assets by more than €20,000.00. You must have made reasonable efforts to make use of the alternative arrangements to bankruptcy such as a Debt Settlement Arrangement (DSA) or Personal Insolvency Agreement (PIA) to the extent your financial circumstances permit you.
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. He will take over all your assets but all your liabilities too so you no longer have to deal with your creditors.
What happens when you are declared bankrupt?
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. 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.
A payment of €200.00 must be paid to the Insolvency Service of Ireland Bankruptcy Department towards the costs of the Official Assignee and towards court costs.
The Bankruptcy (Amendment) Act 2015, which came into effect on 29 January 2016, provides for several changes to the rules on bankruptcy. It includes the following provisions:
- Reducing the normal duration of bankruptcy from 3 years to 1 year.
- Returning ownership of the bankrupt person’s home to them after 3 years (subject to any outstanding mortgage) unless it must be sold to pay creditor.
- Reducing the maximum duration of bankruptcy payment orders from 5 years to 3 years, except in cases of non-co-operation or concealment of assets.
- Extending the duration of bankruptcy in cases of non-co-operation or concealment.
- Streamlining and clarifying the processes.
The Family Home
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. The mortgage holder bank may opt to stay outside the bankruptcy which may result in the bank agreeing a mortgage repayment with you or else selling the property with any balance left over going into the bankruptcy.
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 although you may apply to the court to increase that figure:
- Furniture and tools or equipment relating to trade
- Necessities for your family and any dependent relatives living with you
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.
What alternatives are there?
You can explore the options of:
- An informal arrangement or settlement’ or a
- Formal arrangement by way of a Debt Settlement Arrangement; or a
- Formal arrangement by way of Personal Insolvency Arrangement; or
- 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.
Restrictions on people who have been declared bankrupt
Once you have been declared bankrupt:
- You must disclose the bankruptcy when getting a loan or any other credit facility of €650 or more;
- If trading in a name other than that in which you were made bankrupt, you must disclose the bankruptcy. You may still work as a sole trader with a VAT number etc., or as a PAYE employee.You cannot act as a director, manager, auditor, liquidator or receiver of a company without permission of the court.
- The Official Assignee can claim assets that you acquired after the date you were made bankrupt, such as a gift or inheritance.
- If you wish to travel outside the State, you should tell the Official Assignee.
- As a bankrupt, you may not hold elected representative office. This includes local authorities, the Dáil and the Seanad.
How long does bankruptcy last/discharge from bankruptcy?
With effect from the 29th of January 2016, the period for automatic discharge from bankruptcy has been reduced from 3 years to 1 years. The Official Assignee can look for an Income Payment Order for upto 3 years. Now a real alternative to living with your debts exists.
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.
How to apply
You can either apply to the Examiner’s Office of the High Court yourself or we can assist you in making the application for bankruptcy in the High Court. If you feel bankruptcy may be the right option for you and you would like advice please contact us for an appointment and we can then discuss the matter with you.