THE END OF BANKRUPTCY TOURISM! – ONE YEAR BANKRUPTCY PERIOD
This One Year Bankruptcy has been a long time in coming. People have been suffering for long enough the debt hangover from the Celtic Tiger era.
In 2012 big changes were introduced. The Insolvency Service of Ireland was set up. Various insolvency arrangements were put in place. The bankruptcy term was reduced from 12 years to 3 years.
Since 2012, the numbers of people choosing the route have increased to a staggering degree. However there has always been a comparison to the UK system where the period of bankruptcy is only one year.
It is widely reported that many people, including high profile applicants like Sean Quinn and Ivan Yates have availed of “bankruptcy tourism” and relocated to the UK to avail of the benefits of this.
Labour TD Willie Penrose proposed reforms here earlier in the year to reduce the Bankruptcy period to just one year. He wanted to give people the chance to get back on their feet without potentially producitve years in financial limbo.
With upcoming elections the time to make real changes to help those with debt difficulty was right. It was announced that one year bankruptcy is now going to be a reality for those who need it.
When will this happen?
A final draft of the legislation was being discussed last week between the departments of justice and finance. It is understood that there is broad agreement on the proposal. The final discussions have centred around the circumstances where someone leaves bankruptcy.
At the moment, depending on income, those in bankruptcy may have to pay a portion of that income over for a number of years after they are out of the process.
The final debate seems to be centred around this issue and what time periods are to apply for such income orders.
The Cabinet held a meeting on Wednesday where the Bill was approved. It is expected to pass in the Dail and the Seanad by the end of next week.
What does this mean?
In reality it means that those who do not have sustainable debt can be debt free after just one year.
It will also mean that the numbers of those travelling to the UK to be declared bankrupt should be virtually wiped out as the Irish system will now have the same benefits.
Will it affect those in bankruptcy already?
There is talk that provisions will be brought in to allow an 18 month bankruptcy discharge for those who have been declared bankrupt one year or more ago. We will not know for sure until the laws are presented to government.
New changes to Bankruptcy Costs were also introduced to remove cost barriers.
The Insolvency Service, last October, sought to take the first real steps to change the measures since their reform in 2012.
This was done by reducing Bankruptcy application fees from over €1,000 down to just €270.
What do I need to do to find out more?
If you decide to go down the Bankruptcy route, the first port of call is to see if a personal insolvency arrangement rather than a Bankruptcy would be workable.
If a Personal Insolvency Arrangement is not an option, because it is either not feasible or creditor agreement is not a possibility , then Bankruptcy may very well be the preferred option.
As a solicitor, as well as a Personal Insolvency Practitioner, I would urge all those who are unable to cope with their debt payments to make contact with me to explore the options available to you.
The time to act is now to free yourself of financial strain. There is help there for every case.