Taoiseach Enda Kenny has today announced that legislation reducing the term of bankruptcy could become law before the end of the year.
Bankruptcy is the last resort open to a creditor who cannot get paid by any other means and the end of the line for a debtor who is not able to pay his debts.
When it is approved by the High Court everything the debtor owns (except the bare necessities to live and work) are handed over to a Court appointed official, called the Assignee in Bankruptcy to be sold.
This is a Court managed regime which is managed by a Court appointed supervisor. This has usually been the Official Assignee in Bankruptcy but there is the option to appoint a Private Trustee.
When the property or assets are sold, the costs, expenses, court fees and certain priority debts of creditors (such as revenue liabilities, local rates, certain employees’ entitlements etc) are paid. After this, the net proceeds are distributed to other creditors are owed money (the general creditors).
The proposed legislation will reduce the current term of bankruptcy from 3 years to one year.
This follows on from a report published by the Oireachtas Joint Committee on justice, defence and equality which recommended that the term be cut to one year. This proposal would bring Irish law on bankruptcy in line with Northern Ireland, England and Wales where a one year term applies.
One of the main arguments in favour of the change in the law is that it would enable those who have declared bankruptcy to return to work or business as soon as possible and to make a positive contribution to the economy again.
It is hoped that the change will make financial institutions more agreeable to working with debtors through Personal Insolvency Arrangements and Debt Settlement Arrangements.
The law on bankruptcy has seen significant changes recently, with the term reduced to 3 years from 12 years through the Personal Insolvency Act 2012.
The latest figures from the Insolvency Service of Ireland have shown that the number of people declared bankrupt has fallen to 83 for the third quarter of this year.
The Taoiseach spoke in the Dail today and said that the government had accepted the need for the term to be reduced.
If you have a question about bankruptcy or managing your debts we can help. The Lynch Solicitors team has extensive experience with debt management and insolvency.