Bankruptcy in Irish Law is a legal process, supervised by the High Court whereby the assets of a personal debtor are realised and distributed amongst his or her creditors in cases where the debtor is unable or unwilling to pay his debts.
Bankruptcy in Ireland applies only to natural persons.It might be noted that bankruptcy applies to partners in partnerships as a partnership does not have a separate legal personality to that of its members. Other insolvencyIt might be noted that insolvency is not a precondition to bankruptcy in Ireland and unwillingness to pay debts may suffice see: processes including liquidation and examinership are used to deal with corporate insolvency.
A bankrupt is somebody who has been adjudicated bankrupt by the High Court. Once a debtor is adjudicated bankrupt, bankruptcy lawThe principal provisions governing Irish bankruptcy law are: as amended by as substituted by and These regulations give effect to the provides for the mandatory vesting of all of the bankrupt's assets and property in the Official Assignee (OA). Under the supervision of the Court, the OA will realise the bankrupt's assets and distribute the assets according to law among the bankrupt's creditors.
The essence of bankruptcy is that the debtor's assets are transferred to an official who administers and realises them for the benefit of all creditors. The purpose is to release the bankrupt from an unsustainable debt burden and to distribute his assets amongst all creditors equally (although certain types of creditor enjoy priorities). The bankrupt person is subject to restrictions and disabilities on trading and on obtaining credit while a bankrupt but leaves the process with their debts forgiven.
The Official Assignee in bankruptcy can challenge and set aside pre-bankruptcy transactions by the bankrupt to make the assets, the subject of those transactions, available to the creditors.
The classic definition of bankruptcy is that: "it is a law for the benefit and relief of creditors and their debtors, in cases in which the latter are unable or unwilling to pay their debts."US House of Representatives debate on a bankruptcy bill 1818, quoted in United States v. Pusey 5 Am. L. Times Rep. 122 1873
Irish bankruptcy law has been the subject of significant recent comment, from both government sources and the media, as being in need of reform. Part 7 of the Civil Law (Miscellaneous Provisions) Act 2011 has started this process and the government has committed to further reform.
When bankruptcy arises in Ireland
While bankruptcy is commonly considered to arise where a person is insolvent, in Ireland a person can be adjudicated bankrupt where he has committed any act of bankruptcy.
An act of bankruptcy is defined as:
"an act of default, voluntary or involuntary, committed by a debtor, which is either evidence of intent to deprive creditors of their rights through fraudulent assignment or is an implication of insolvency."
Acts of bankruptcy The following situations are considered to be acts of bankruptcy pursuant to section 7 of the Bankruptcy Act 1988:
where an individual makes a conveyance or assignment of all or substantially all of his property to a trustee(s) for the benefit of his creditors generally; where an individual makes a fraudulent preference —this is a transfer of property made in favour of a particular creditor, with a view to giving such a creditor priority over other creditors; where an individual makes a fraudulent disposition —this is the transfer of property between persons with the intent to defraud creditors or potential creditors generally; where an individual leaves the state or his dwelling house and stays away with the intent of defeating, delaying or evading his creditors; where an individual files a declaration of insolvency in court; where a creditor presenting a petition, who is due at least €1,900,Amended from £1,500 in the Bankruptcy Act 1988 by the has served a bankruptcy summons on the debtor and he does not within 14 days after service thereof pay the sum due; if a debtor fails to comply with a debtors summons served pursuant to Section 21(6) of the Bankruptcy (Ireland) Amendment Act 1872.
The most common act of bankruptcy is where a bankruptcy summons has been served on the debtor and he has failed to pay.In the decision of , the Supreme Court stated that the practice which had developed in the High Court whereby an unsatisfied judgment and a return of no goods was required before a bankruptcy summons would issue, was incompatible with the Bankruptcy Act. This judgment has the effect of shortening the time frame in which bankruptcy proceedings can be brought, and reducing the costs of bringing bankruptcy proceedings. Creditors can now proceed to issue a bankruptcy summons as long as they have complied with requirements of the Act. See ,
Objectives of bankruptcy legislation
Bankruptcy law is aimed at achieving the following.: securing equality of distribution and to prevent any one creditor obtaining an unfair advantage over the others; protecting bankrupts from vindictive creditors by freeing them from the balance of their debts where they are unable to pay them in full, and to help to rehabilitate them; protecting creditors, not alone from debtors who, prior to bankruptcy, prefer one of more creditors to others, and from the actions of fraudulent bankrupts; and punishing fraudulent debtors.
Legal effects of bankruptcy When a debtor is adjudicated bankrupt, the most notable effects on his personal situation are as follows:
all the debtor's assets and property vest automatically in the OASection 44 of the Bankruptcy Act 1988 subject to certain exceptions set out in s 45 thereof. but see excepted articles below; the bankrupt must disclose to the OA any property acquired after being adjudicated bankrupt; any payment or any transfer of property by the bankrupt to a creditor in preference over other creditors that took place in the 1-year period prior to being adjudicated bankrupt shall be deemed to have been fraudulently done and may be undone or otherwise dealt with by the Court;Section 57 of the Bankruptcy Act 1988, as amended by Section 57 of the Civil Law Miscellaneous Provisions Act 2011. any sale of property at an under value that the bankrupt carried out in the one-year period prior to being adjudicated bankrupt may be avoided and undone by the OA;Section 58 of the Bankruptcy Act 1988, as amended by Section 57 of the Civil Law Miscellaneous Provisions Act 2011 any person who is known or suspected to have in his possession or control any property of the bankrupt or to have disposed of any property of the bankrupt or who is supposed to have indebtedness to the bankrupt or any person who is capable of giving information relating to the trade, dealings, affairs or property of the bankrupt may be summonsed by a Court; the bankrupt's salary is likely to be attached in favour of the OA;Section 65 of the Bankruptcy Act 1988. the Court may make such allowances as the Court thinks proper, in any special circumstances brought to its attention, to the bankrupt out of his or her estate;Section 71 of the Bankruptcy Act 1988. certain of the bankrupt's post may be re-directed to the OA;Section 72 of the Bankruptcy Act 1988. it is an offence for the bankrupt to act as an officer of or directly or indirectly take part or be concerned in the promotion, formation or management of any Irish company or of any foreign company which has an established place of business in Ireland;Section 183 of the Companies Act 1963 as substituted by Section 169 of the Companies Act 1990 the bankrupt cannot obtain credit over €650 without disclosing his status as a bankrupt;Section 129(1) of the Bankruptcy Act 1988 as amended by the Euro Changeover (Amounts) Act 2001. the bankrupt is restricted from participation in a range of bodies set up by statute;See the statute establishing any specific body where the bankrupt is or may become involved. after five years the bankrupt may be discharged;Section 30(h) of the Civil (Miscellaneous Provisions) Act 2011 after twelve years the bankrupt will be discharged; andSection 30(h) of the Civil (Miscellaneous Provisions) Act 2011 is commenced. the Revenue Commissioners are obliged to provide information on request to the Official Assignee.Section 18A of the Bankruptcy Act 1988 as inserted by s. 30 of the Civil Law (Miscellaneous Provisions) Act 2011 until the Electoral (Amendment) Act 2014, undischarged bankrupts were not eligible to stand in elections other than local elections.
The bankrupt commits a criminal offence if he does not disclose all his property to the Court or conceals any part of his estate or if he obtains by false representation any property or credit.
Offences carry the penalty on summary conviction of a fine not exceeding €634.87 or up to 12 months prison or both and on indictment of a fine not exceeding €1,269.74 or up to 5 years prison or both.
Excepted articles Pursuant to S45 of the Bankruptcy Act (as amended), a bankrupt is permitted to retain as excepted articles: clothing, furniture, bedding, tools or equipment of his trade or occupation or necessary items for himself, his/her spouse or civil partner, children and dependent relatives residing with him/her, as he may select, not exceeding in value €3,100 or such further amount as the court on an application by the bankrupt may allow.
If, having selected items up to the specified value, the bankrupt requests the official assignee not to dispose of items of the kind set out above, the OA may not dispose of such items other than in accordance with an order of the court.
On an application by the OA or by the bankrupt under this section the court may postpone the removal and sale; permit the bankrupt to retain the items or order the sale of the items at any time.
Suspension of enforcement
Once a bankruptcy petition issues, all uncompleted legal enforcement against the debtor is stopped. This is to preserve equality among creditors as no enforcement action can be taken against a bankrupt.
The proceeds of execution of a Court order must be retained by the Sheriff for 21 days. If a bankruptcy commences in this period, the proceeds are sent to the official assignee rather than the creditors. If the process has not been completed, then bankruptcy will freeze enforcement and the assets collected by the sheriff must be turned over to the bankruptcy trustee or OA.
The OA can apply to have proceedings stopped or restrained. Legal proceedings will generally be stopped on such terms as the court deems appropriate.
On adjudication of bankruptcy, creditors may not take action against the bankrupt's person or property without Court consent.
However, a secured creditor can realise its security separately from the bankruptcy.
Initiating the bankruptcy process
Creditor's petition
A creditor is entitled to present a petition for adjudication against a debtor, without having to give notice to the debtor, if:Bankruptcy Act 1988 section 11
the debt owing by the debtor to the petitioning creditor amounts to €1,900 or more; the debt is a liquidated sum (a sum certain); the act of bankruptcy on which the petition is founded has occurred within three months before the presentation of the petition; and the debtor is domiciled in the state or, within three years before the date of the presentation of the petition, has ordinarily resided or had a dwelling house or place of business in the state or has carried on business in the state personally or by means of an agent or manager, or is, or within the said period has been, a member of a partnership which has carried on business in the state by means of a partner, agent or manager.Where the creditor has interests in multiple states see Centre of Main Interests with regard to which is the appropriate forum for insolvency proceedings.