Neo Financial Solutions

Personal Insolvency or Bankruptcy

What is Bankruptcy?

Bankruptcy is a process where the property or assets of an individual, who is unable or unwilling to pay their debts (called a debtor), is transferred to a person given charge of the property by the High Court (called a trustee) to be sold.

When the property or assets are sold, the costs, expenses, court fees and certain priority debts are paid. After this, the funds left (if any) are distributed to those owed money (the creditors).

In nearly all cases, the Official Assignee (OA) in Bankruptcy, an officer of the Courts, is the trustee to whom this property is transferred. This is the person who administers the estate of bankrupt person and has control of the assets of the debtor.

Bankruptcy proceedings are brought in the High Court. The application for a bankruptcy order is filed in the Office of the Examiner of the High Court. Following this, the proceedings are dealt with by the High Court

i)     Bankruptcy is a serious matter

The participation in a bankruptcy is a serious matter and should only be entered into after exhausting all other avenues and possible arrangements with creditors including such arrangements as outlined in the new Personal Insolvency Act 2012[1].

If you enter into bankruptcy it will be registered with the Insolvency Service of Ireland, you will most likely lose all of your assets (except those necessary to run a business, personal items and furniture) and it will be a matter of public record. It will affect your credit rating and you will have to inform anyone you borrow more than €630 from that you are an un-discharged bankrupt.

ii)    An Act of Bankruptcy

The Bankruptcy Act 1988 sets out 7 circumstances that are acts of bankruptcy which are effectively acts that if the debtor takes, their creditors can apply to have the debtor adjudged bankrupt if they wish too. It is important to note that a debtor can also make himself or herself bankrupt.

It is with this act of bankruptcy in mind that I have decided to put together this guide to the bankruptcy process.

iii)  Recent amendments to the Bankruptcy Act 1988

Because of the recent amendments to the Bankruptcy Act 1988 and in particular the reduction of the length of time bankruptcy can last going from initially 12 years to 5 years and now 3 years bankruptcy is actually a practical solution for some people in today’s economic environment.

Another very important amendment to the 1988 Act was the introduction of an automatic discharge after 3 years in bankruptcy. Previously it was up to the courts to decide if you were discharged.

iv)  Other supports

The bankruptcy process is a difficult one and it would be remiss of me to say otherwise. It brings not only financial but personal stresses which also have to be managed.

It is vital that you have someone you can talk too openly and who will not be judgmental. You will need someone whether that is a husband, wife, partner, family member or close friend you can talk to, discuss issues with and just rely on for personal and emotional support. Being open with those close to you will be surprisingly refreshing and usually only confirms what they already know about your financial difficulties.

[1] See Irish Insolvency Guide published by Paul Carroll January 2013