Bankruptcy and Personal Insolvency

Holohan Law has acted for the Office of Official Assignee in Bankruptcy and for individuals who are facing personal bankruptcy for over 20 years.

We are regularly consulted by Creditors and Debtors alike, as one of the authorities on the interpretation of the Bankruptcy and Personal Insolvency Legislation, a partner in the Firm, (with barrister co-authors), quite literally “having written the book” on each of the two topics!.

The Bankruptcy Process

If you are in serious financial difficulties, you may decide that declaring bankruptcy is the best solution for you. However, declaring bankruptcy is a drastic option and so requires careful consideration after looking at all other available options.

A creditor can apply for bankruptcy against you if you have committed an act of bankruptcy within the previous 3 months and certain other pre-conditions can be satisfied. Examples of acts of bankruptcy are:

  • If you fail to comply with a bankruptcy summons demanding payment of a specific sum due, within 14 days from service of the summons on you; or
  • If the Sheriff or County Registrar, on foot of a court order, tries to collect from you without success and makes a return of “Nulla Bona/No Goods” in respect of you.

If you are declared a Bankrupt, all of your assets with the exception of necessities up to a value of €6,000 (this can be increased in certain circumstances, are transferred to the Official Assignee. Under EU legislation, (EU Insolvency Regulations 2002) bankruptcy proceedings in Ireland may be recognised as proceedings in most other EU member states. In most cases, this should allow the Official Assignee to realise such property for the benefit of creditors.

The Official Assignee will sell them, pay costs, expenses, fees and certain priority debts (such as taxes) and distribute the remainder of the proceeds amongst 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 property is held jointly (for example, with a spouse) the bankruptcy will cause the joint ownership to be split between the Official Assignee and the non-bankrupt co-owner.

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:

  • You do not disclose the bankruptcy when getting a loan or any other credit facility of €650 or more.
  • When trading in a name other than that in which you were made bankrupt, you do not disclose the bankruptcy.
  • You act as a director, manager, auditor, liquidator or receiver of a company without permission of the court.

These offences carry a maximum penalty of 5 years in prison and a fine of €1,270.

Other consequences of bankruptcy are:

  • 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. 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.
  • If you hold a general power of attorney on behalf of someone else, it is automatically revoked if you become bankrupt.
  • As a bankrupt, you may not hold elected representative office. This includes local authorities, the Dáil and the Seanad.

How long does bankruptcy last?

With effect from 3rd 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 3rd December 2013 will automatically discharge once a further 6 months has elapsed.

Discharge from bankruptcy by the High Court.

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. You can be released from bankruptcy in any of the following ways:

  • If your creditors have been paid in full.
  • If all of your unsecured creditors give their consent.
  • After agreeing and paying a settlement with at least 60% of your unsecured creditors (called an Offer of Composition).
  • After payment of 50 cent in the euro when all your property has been sold.

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).

Can a debtor stop the bankruptcy?

A debtor may apply to the High Court within 3 days of the service of the bankruptcy order giving reasons why he/she should not have been made bankrupt.

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