A quick run through on the most common questions we are asked including:
Who can go bankrupt?
The Bankruptcy Act 1988 sets out 7 acts of bankruptcy (these include not paying bills on time, transferring assets in order to avoid paying creditors, making payments to one creditor over another, if a court order has been served for the seizure of goods, leaving the country in an attempt to escape creditors, applying for an insolvency arrangement or a petition for a bankruptcy summons has been served) any of which can be used by creditors to petition for the debtor to be adjudged a bankrupt if they do not pay their bills immediately.
i) Can I declare myself bankrupt?
Yes a debtor can file for bankruptcy themselves if they are in a position that they cannot pay their bills and/or they are insolvent.
Anyone who cannot pay their bills and is not able or willing to enter into an arrangement to settle their debts through either a voluntary arrangement or a formal insolvency arrangement through the Personal Insolvency Act 2012 can declare themselves bankrupt.
ii) If I am self employed can I declare myself bankrupt?
A self employed person can declare himself bankrupt and can continue to be self employed while in bankruptcy. However the debtor cannot be a company director nor can they hold themselves out to be managing a company.
If the debtor is self employed they must trade under their own name or have their name included in the business name under which they are trading while an un-discharged bankrupt.
Some professions specifically exclude a bankrupt practicing these include solicitors, auctioneers and accountants. It will be important to establish if a debtor’s trade or profession has any limitations on trading as an undischarged bankrupt.
iii) Can I earn income and be employed when I am a bankrupt?
In bankruptcy the debtor is allowed to continue to work and earn a living. In fact for those in employment bankruptcy will have little effect at all on their employment unless they are in receipt of a large salary in which case they may be subject to an attachment order on some of their income by the OA.
Any such order will only apply where there is excess income after allowing for reasonable living expenses which provide for the bankrupt, their family and any other special circumstances of the bankrupt.
Bankruptcy is not meant to ‘enslave the debtor to the creditors’ and there are guidelines issued by the Insolvency Service of Ireland (ISI) which the OA will use to assess reasonable living expenses which can be increased due to special circumstances of the debtor and family. Special circumstances will take into account health, distance from work, education needs, age of family members, etc.
It is important to note that social welfare payments are excluded when calculating income and would never be the subject of an attachment order.
iv) Can I have a bank account while I am a bankrupt?
It is often thought that a bankrupt cannot have a bank account. This is not true. The bankrupt can have a bank account but has to declare that they are an undischarged bankrupt if they wish to borrow in excess of €620.
It would be normal for the OA to take over and close any bank accounts which the Debtor had prior to bankruptcy and so the debtor will have to open a new bank account to facilitate payment of expenses and receipt of income post bankruptcy.
v) What happens to my furniture, personal possessions, computer equipment and tools of a trade?
When a debtor is declared bankrupt they are able to keep furniture, equipment necessary for education and other tools of their trade in order that they can continue to work and support their family and dependents. There are some values put on items such as furniture (€6,000) but no value on tools etc.
A debtor is also allowed to retain their car as long as the value is not excessive and if sold would not yield a significant dividend to their creditors.
For more information and how we can help you through bankruptcy please call us on 01 437 0908
Paul C Carroll Accountant
NEO Financial Solutions