What is One Year Bankruptcy?
Bankruptcy is where the property or assets someone who is unable or unwilling to pay their debts are transferred to a person who is given charge of the property by the High Court (called the Official Assignee) to be sold.
When those assets are sold, the costs, expenses, court fees and certain priority debts of lenders (such as revenue liabilities, local rates, certain employees’ entitlements, etc) are paid.
After this, the proceeds are divided between all other creditors who are owed money.
The person is then subject to the Bankruptcy period of currently three years after which they are essentially debt-free. Any amounts outstanding to creditors at that time are written off.
If the Debtor is earning they may be subject to an Income Order for currently 5 years, these 5 years can begin to run from when they are declared bankrupt.
This means that you will receive a figure which represents your reasonable living expenses as determined by Insolvency Service of Ireland guidelines to live and anything over and above this will be put towards the repayment of debt.
Bankruptcy is a real option for those who are struggling with debt to start again without the weight of their borrowings dragging them down.
What about the recent talk of reform?
Further change had been called for, for a long time and it seems that pressure from all sides has had the effect of persuading the Government to make the necessary changes.
Labour TD Willie Penrose proposed reforms to reduce the Bankruptcy period to just one year, (similar to that in the UK currently), to give people the chance to get back on their feet without wasting excessive years in financial limbo.
The Bill has been introduced and it has been reported that the Government has indicated that it will be approved by Cabinet over the next number of weeks.
One year bankruptcy may be a reality before long which will mean a fresh start for a considerable number of people.
Video: Insolvency Arrangments Explained
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What are the main consequences of bankruptcy?
On bankruptcy, all your existing debts are written off.
- your assets, including any bank accounts, are frozen;
- you must disclose all your assets, liabilities and earnings;
- the Assignee will assess your income to get voluntary contributions from you over a three year period;
- your bankruptcy is advertised.
The most common restrictions for a bankrupt are that you cannot:
- Get credit over €635 without disclosing that you are bankrupt;
- act as a director of a limited company or be involved in its management without leave of Court;
- be involved in a partnership.
- earn money either as an employee or self-employed trading under the name you were made bankrupt;
- operate a bank account though this will be in credit at all times;
- retain a motor vehicle so long as the Assignee’s considers it a necessity ;
- retain household furniture and effects sufficient for the basic domestic needs of yourself and your family up to €6000
During the period you cannot own anything and anything that you do own on bankruptcy ( eg property ) becomes the property of the Assignee.
Your property will usually be offered first to members of your family giving them the option to purchase your share of the equity before it is placed for sale on the open market.
If the property or any other asset remains unsold when your bankruptcy finishes it does not revert to you but can still be realised by the Assignee at a later date. For example, a property that may not have any equity in it on bankruptcy may appreciate in value and so cost more to buyback.
Under the proposed changes the family home will revert to the Bankrupt if it is not sold after a period of time post Bankruptcy.
Should you receive any legacy or windfall during the period then this will form part of your Estate and must be paid over to the Assignee.
The vast majority of clients who have gone Bankrupt have told us that the process has been very straight forward for them.
It is now time to put the hangover of the Celtic Tiger years behind you.
If you are considering bankruptcy as an option and would like any more information it is important that you consult us at an early stage so that we can deal with your case and provide you with detailed legal advice.
Over the past 30 years, we have a proven track record for getting results and achieving a satisfactory outcome for our clients in even the most difficult and complex cases /shown a commitment to taking on difficult cases and we are not afraid of fighting meritorious cases no matter how difficult and complex.
Find Out More About Bankruptcy & Insolvency
At Lynch Solicitors, we are one of the few solicitor firms who specialise in dealing with Bankruptcy & Personal Insolvency. We offer a one-stop service in an area that has undergone tremendous change in recent times, most notably, the introduction of one-year bankruptcy. We have appeared for clients in the High Court Bankruptcy Court. We appreciate that the decision to enter bankruptcy is not an easy one to make. We understand that the decision has many aspects that need consideration. We are happy to give clients the benefit of our experience in this relatively new and developing area of law. Read more here.
The issue of bankruptcy in Ireland is one mired in much confusion. While the issue has been covered at length in recent years by the media, there is still misunderstanding of what bankruptcy is and what happens to a person that becomes bankrupt. This brief looks at the issue and answers the most commonly asked questions. Read more here.
One year bankruptcy is now a reality in Ireland after the Bankruptcy (Amendment) Act 2015 was brought into law by a commencement order on Friday, January 29th, 2016.
The commencement order reduced the normal duration of bankruptcy from three years to one-year bankruptcy. Read more here.
Video: The Difference Between Insolvency & Bankruptcy
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