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Bankruptcy Ireland

terry — Wed, 10 Mar 2010 22:16:15 +0000

Bankruptcy Ireland-Bankruptcies In Ireland

terry — Tue, 29 Sep 2009 18:42:18 +0000

Bankruptcy is a commercial reality facing many small business owners in Ireland today.And the number of bankruptcies is increasing dramatically.

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 net proceeds are distributed to those owed money (the creditors).

In nearly all bankruptcy cases, the Official Assignee in Bankruptcy, an officer of the Courts Service, is the trustee to whom this property is transferred. This is the person who administers the estate of bankrupt persons.

Bankruptcy proceedings are brought in the High Court. The application for a bankruptcy order (as well as any other application for the Bankruptcy list of the High Court) is filed in the Office of the Examiner of the High Court. Following this, the proceedings are dealt with by the High Court.

Declaring bankruptcy

The High Court makes a debtor bankrupt either at the request of a creditor or at his own request. In either case, this request is made in a document called a bankruptcy petition. This must be filed in the Office of the Examiner of the High Court.

When the petition is filed, the petitioning creditor or debtor undertakes to the court to advertise notice of the bankruptcy in various newspapers. The advertisement must also contain details of the place, date and time of the next time this is before the court (called the statutory court sitting).

The petitioner must also lodge €650.00 towards the costs and outlays of the bankruptcy in the Official Assignee’s Office and give an undertaking to the Official Assignee as to the further costs and outlays which may be incurred.

Bankruptcy Petition by a debtor:

A debtor may bring a petition for his/her own bankruptcy where he/she is unable to pay debts to creditors and where his/her available estate (for example assets and property) is sufficient to produce at least €1,900.00.

Bankruptcy Petition by a creditor:

A creditor may petition for bankruptcy against a debtor where the debtor has committed an act of bankruptcy within the previous three months. The most common acts of bankruptcy relied upon by a creditor are:

(a) failure by the debtor to comply with a bankruptcy summons requesting payment of a specific sum due, within fourteen days from service of the summons on the debtor, and

(b) the making of a return of no goods in respect of the debtor, by the sheriff or county registrar.

For a creditor to be entitled to petition the court to make a debtor bankrupt, a number of conditions must be met. These include :

the petition must be presented within three months of the act of bankruptcy,
the amount of debt owed must be set out in an affidavit,
the debt owed must be at least €1,900.00,
the debtor must be either resident in the State or within a year prior to presentation of the petition, have ordinarily resided, had a dwelling house or place of business, or carried on business within the State.

The creditor’s petition for bankruptcy must state whether any security (for example, a mortgage or a charge) is held by them in respect of the debt. If so, the creditor must indicate whether he/she intends to give up the security for the benefit of other creditors orput a value on their security.

The consequences of bankruptcy

Bankruptcy impacts not only on the person made bankrupt, but also on their creditors, as well as others, including their family members or people who have a commercial relationship with the bankrupt.

The bankrupt
Following adjudication (the court order making you bankrupt) a notice of this is published by the petitioning creditor or you (if you have made yourself bankrupt) in one national and one local newspaper.

This notice will also contain information about the next statutory court sitting. A local newspaper is one which is published in the area where you live or carry on business.

Creditors may appear at the statutory court sitting and may make a claim under the bankruptcy. Other notices are also published at various stages of the bankruptcy, such as advertising for creditors and notice of discharge of bankruptcy.

A bankruptcy register is maintained in the Office of the Examiner of the High Court and searches can be made against this register.

Can I stop the bankruptcy?

You may apply to the High Court within 3 days of the service of the bankruptcy order on you, giving reasons why you should not have been made bankrupt. This is called a show cause application.

What am I required to do when I am made bankrupt?

You must co-operate fully with the Official Assignee’s office in all matters relating to your bankruptcy. You must inform the Official Assignee if you change address.

Initially you must attend for interview with the Official Assignee. You must also file a Statement of Affairs in the Office of the Examiner of the High Court.

This document sets out all of your financial details including assets held and all amounts owed by you. The statutory court sitting will only be passed in the High Court when your Statement of Affairs has been filed.

You also have other legal obligations in connection with the administration of your estate and assets. This includes:

the delivery of your accounts or papers to the Official Assignee when requested,
the delivery of your title deeds to property and any other possessions to the Official Assignee,
assisting the Official Assignee in the administration of your estate, and
disclosing any property acquired by you since the date of your bankruptcy order to the Official Assignee.

Where you fail to co-operate with the Official Assignee, the High Court may summon you to examine you under oath.

What happens to my property when I am made bankrupt?

All property held by you when you are made bankrupt vests in the Official Assignee for the benefit of your creditors.

The role of the Official Assignee is to sell or otherwise dispose of this property (called realisation) and distribute the proceeds to your creditors. A vesting certificate is lodged in the Office of the Examiner of the High Court and with the Property Registration Authority.

This document records the interest of the Official Assignee in any property held by you at the date of adjudication. It means that you cannot sell or use this interest in the property as security to take out a loan.

The only property that does not vest in the Official Assignee is essentials up to a value of €3,100.00, or more if the High Court allows. Any property you acquire after you are made bankrupt, transfers to the Official Assignee, if and when the Official Assignee claims it.

What about property I own abroad?

Under EU legislation, (EU Insolvency Regulations 2002) bankruptcy proceedings in Ireland may be recognised as proceedings in most other EU member states. In most cases, this should allow the Official Assignee to realise such property for the benefit of your creditors.

Does bankruptcy have implications for my salary and pension?

Yes, the High Court may appropriate your salary or pension for the benefit of your creditors. However this is subject to any provision the High Court may make to meet your family responsibilities and your personal situation.

Can I operate a bank account while I am bankrupt?

Yes, you can operate a bank account. However if you obtain credit of €650.00 or more without disclosing your bankruptcy, you are guilty of an offence.

Can I still trade while I am bankrupt?

Yes, as long as you trade in your own name. If you trade in a name other than that in which you were made bankrupt without disclosing this name, you are guilty of an offence. You must notify the Official Assignee of any business or trade in which you engage.

Can I manage a company or become a director of a company?

No, under the Companies Acts it is an offence for a bankrupt to act in various capacities in relation to a company. These include director, auditor, manager, liquidator or receiver of a company.

Can I seek employment while bankrupt?

Yes, and you can continue in current employment or seek employment.

Can I travel outside the jurisdiction?

There is no outright prohibition on you travelling abroad but you should inform the Official Assignee if you intend to do so. You may be arrested if it appears to the High Court that you may be leaving the State in order to avoid the consequences of your bankruptcy.

Are there other consequences of bankruptcy?

Yes, bankrupt persons are not entitled to hold elected representative office, in local authorities, in the Dáil or the Seanad.

Are there alternatives to being made a bankrupt?

Yes, a debtor may enter a voluntary arrangement with their creditors to settle debts due to them and to avoid bankruptcy or other proceedings against them. Arrangements made outside of the control of the High Court tend to be less costly in the long run.

Alternatively, a debtor can apply for an arrangement under the protection of the High Court. This is where a debtor asks the High Court for protection against proceedings to give them time to present a proposal to their creditors.

This proposal could be to pay a dividend (normally a percentage of the amount owed) on their debts or to transfer property to the Official Assignee to be sold and the proceeds distributed among their creditors. The proposal must receive the support of at least sixty per cent in number and value of the unsecured creditors voting on it to succeed. The costs, court fees, expenses and preferential debts must also be paid in full.

I have been discharged from bankruptcy; will my name be removed from the register?

No, the Register is a record of all bankruptcies, including those that have been discharged. A person searching the Register is told the status of the bankruptcy (discharged) and the date it was discharged. No information is given about the address of the former bankrupt.

Family of bankrupt

Can the family home be sold?

The bankrupt’s interest in the family home vests in the Official Assignee as with all other property.

However the Official Assignee may not sell the family home without obtaining permission from the High Court. Where the Official Assignee seeks this permission, the High Court may postpone the sale of the family home having regard to the interests of the creditors and of any spouse and dependants of the bankrupt.

We already have a mortgage or have borrowed against this home

Then this is a secured loan against the property and the Official Assignee’s interest only relates to the equity remaining in the property.

I jointly own the family home with the bankrupt, what about my interest?

Where the bankrupt owns property jointly with a spouse or partner, the bankruptcy causes the joint ownership to be split. The Official Assignee and the non-bankrupt co-owner then hold separate interests in the property.

As a bankrupt can still earn a living, what about our income?

The Official Assignee may apply to court for the appropriation of part of the bankrupt’s salary, income or pension. If the High Court directs any deduction to be made, it may have regard to the bankrupt’s family responsibilities and personal situation.

Social welfare and unemployment payments are not liable to appropriation.

Commercial relationship with a bankrupt

The following are some common examples of third parties dealing with a bankrupt.

Property owned jointly with a bankrupt

Where a person owns property jointly with a bankrupt, the bankruptcy splits the joint ownership. The non-bankrupt co-owner and the Official Assignee then hold separate interests in the property.

Property transferred by the bankrupt

Bankruptcy has legal implications for property transfers and possibly sales where the bankrupt entered into such transactions within certain time limits prior to the bankruptcy.

Partnerships

A partnership where the bankrupt is a partner is dissolved by the bankruptcy. This is unless the terms of the partnership provide for it to continue.
Creditors

What can I do if a bankrupt owes me money?

You cannot use normal remedies (for example, execution, instalment orders and registration of judgment mortgages) to secure payment of your debt if the money is owed at the date of bankruptcy.

You must make a claim in the bankruptcy for payment.

Will I automatically be paid the amount owed to me?

Only when funds are available to the Official Assignee to distribute. In addition, all creditors must prove their debt. This means they must provide evidence of their debt to the Official Assignee, for example, invoices, bank statements, judgment orders or affidavit of debt.

An advertisement for creditors will be placed in newspapers during the bankruptcy process. This asks creditors to submit proof of their debt to the Official Assignee.

But creditors do not have to wait until the advertisement – they can send their proof to the Official Assignee before that date if they wish. Dividends to creditors will only be paid after this advertisement appears and a proof of debt sitting is held by the Official Assignee. This is where the Official Assignee decides if a debt (or the amount of a debt) is admitted.

All creditors are entitled to examine the proofs of other creditors.

Only debts owed on the date of adjudication are admitted under the bankruptcy. The High Court decides on disputed debts. This is where the bankrupt and the creditor do not agree on the amount owed or the amount admitted by the Official Assignee.

Once my debt is admitted will I be paid in full?

Not necessarily, this depends on a number of factors:

the amount of funds available for distribution

status of your debt,

value of the bankrupt’s estate,

method of discharge.

Do all creditors have the same standing in the bankruptcy?

No – there are different categories of creditors and their standing in a bankruptcy depends on whether they hold security for their debt or not. Once a debtor is made bankrupt, the petitioning creditor ranks equally along with all the other unsecured creditors. However the costs of the petitioning creditor must be paid before a bankruptcy is discharged.

What is a secured creditor?

A secured creditor holds security such as a mortgage or judgment against a property owned by the bankrupt.

The secured creditor can rely upon this security and sell the asset comprising the security. They must account to the Official Assignee in respect of the sale and may claim for any amount (if any) still owed following the sale.

After this and payment of any other secured claims, the secured creditor must pay any surplus to the Official Assignee and/or others having an equity in the property. There can be a number of creditors holding security against a single property.

Alternatively, the secured creditor may abandon their security and make a claim as an unsecured creditor for the entire debt.

What is a preferential creditor?

A preferential creditor is a creditor whose debts have priority for payment before other creditors. These include taxes, rates and certain kinds of employee claims and benefits. These must be paid in full before a bankruptcy is discharged.
What is an unsecured creditor?

An unsecured creditor does not hold any security, for example, trade creditors and other business debts. They rank equally with other unsecured creditors.

Discharge from bankruptcy

How long does bankruptcy last?
Anyone who is made a bankrupt remains a bankrupt, even after death, unless or until they are discharged by the High Court. There is no right to automatic discharge.

How is a person discharged from bankruptcy?

A bankrupt may be discharged from bankruptcy in a number of ways. No bankrupt can be discharged unless there are enough funds to pay:

The costs of the Official Assignee,

High Court fees,

The costs of the petitioning creditor,

The preferential debts of the bankrupt.

When someone is discharged from bankruptcy, any funds or properties remaining with the Official Assignee are returned to the former bankrupt.

(i) Discharge after payment of debts in full:

This is where the bankrupt’s creditors are paid in full. If the High Court so allows, interest may also be payable. Normally, interest is only paid where surplus funds are available.

(ii) Discharge with the creditors’ consent:

This is where all of the bankrupt’s unsecured creditors consent to the discharge.

(iii) Discharge after making composition with the creditors:

This is where unsecured creditors agree to accept payment of a certain percentage of their debt in settlement of the full amount. This must be supported by at least sixty per cent in number and value of those creditors who vote at a sitting of the High Court for this to be accepted. The bankrupt must provide the Official Assignee with sufficient funds to make this settlement and pay his/her unsecured creditors. This is called an Offer of Composition.

(iv) Discharge after paying fifty cent in the Euro:

This is where all of the bankrupt’s property has been fully sold or disposed of and his/her creditors have received fifty cent in the Euro on their debts.

(v) Discharge after twelve years:

This is where the bankruptcy has lasted for twelve years and all of the bankrupt’s property has been fully sold or disposed of. The court must be satisfied that the bankrupt has disclosed any property acquired since his/her bankruptcy and that it would be reasonable and proper to discharge the debtor from bankruptcy.

Bankruptcy Register

The register is a record of all bankruptcies, including those that have been discharded.

However a person conducting a search against the register is told only the status of the bankrupt ‘discharged’ and the date it was discharged. No information is given about the former bankrupt.

Bankruptcy law

The main provisions of bankruptcy law are contained in the Bankruptcy Act, 1988, the Bankruptcy rules and forms, Order 76 and Appendix O of the Rules of the Superior Courts, the Deeds of Arrangement Act, 1887 and the decisions of the courts.

The court fees payable in bankruptcy and arrangement matters are contained in the Supreme Court and High Court Fees Order.
Bankruptcy searches

At present searches of the Bankruptcy and Arranging Debtor Registers can only be conducted by attending in person at the Examiners Office, 2nd Floor Phoenix House, Phoenix Street North, Smithfield, Dublin 7. The fee per search is available in the Rules & Fees section. Please note this fee is also applicable when the search returns a negative result – that is, there is no entry matching the search criteria on the registers.

Bankruptcy information

If you have any enquiries about a particular bankruptcy or arrangement matter, you should contact the Office of the Official Assignee or the Office of the Examiner of the High Court.

All enquiries about court orders or applications for the bankruptcy list of the High Court should be directed to the Office of the Examiner of the High Court.

To Avoid Bankruptcy

1. Reduce your expenditures.
Analyze what are your needs and wants and segregate the two. Cut off expenses for things that you can live without.

2. Negotiate with creditors.
If it is possible, take your way out of the deadline and ask for a deadline that would work better for both of you. You can also ask them to limit your liability to a certain amount in return for prompt payment.

3. Resort to Debt Restructuring.
This may be obtained through court order or out-of-court.

4. Consolidate debt.
Apply for a loan that has lesser interest rate and pay outstanding loans. This will replace many payments with one monthly payment to one creditor.

Debt Collection In Ireland-Debt Collections

terry — Sun, 27 Sep 2009 09:24:12 +0000

Debt collection in Ireland is a serious problem for many small business owners.

And a working knowledge of the enforcement procedures that are available for collection of debt in Ireland is an important asset for any small business owner.

Debt collection is a topical issue at the moment for many small businesses and entrepreneurs. Questions which crop up most often include-

How do I pursue a debt?

Why can I not issue debtor proceedings for rent owed for my house?

Can I issue debt proceedings in the District Court myself?

What should I do when I receive debt collection letters?

What is the best way to deal with debt collection agencies?

Should I use a debt collection agency when trying to collect a debt?

Judgment mortgages?

Where to bring enforcement proceedings for debt collection?

Generally where the creditor lives of carries on his business. The district court will be the venue for sums less than €6,348.

District Court proceedings (sums less than €6,348)

Where you are owed a sum of less than €6,348 and have exhausted your debt collection procedure of issuing demand letters and are clearly having no success the next step in the debt collection process is to issue and serve a Civil Summons claiming your debt on your creditor.

If you then receive no letter of intention to defend the summons then you are free to apply to the District court office, filing the correct documents, for a summary decree. This simply means that if the person who owes you the debt does not defend your claim or contest the amount, then you can get a summary decree from the district court which certifies the debt that is owed to you.
The documents you need to file in this application are-

1. An affidavit of debt sworn by yourself or by someone on your behalf ( eg company accountant, company secretary)
2. A completed decree form

If the District court is satisfied to enter judgment then you will get your signed decree from the District court and this can be sent to the Sheriff for enforcement. Your debt collection process can be helped greatly if you call to your local district court office and speak to the staff there.

They are generally very helpful and the whole process of debt collection can be greatly simplified with a bit of effort on your behalf.

Circuit Court proceedings (sums less than €38,092.14)

Again when no defence or appearance is received to your issuing of proceedings(Civil Bill) in your debt collection efforts you are free to lodge the necessary papers in the Circuit Court office to obtain judgment.

The papers to be lodged in the Circuit Court office are more extensive and you really need the help of a solicitor to do so. But because the amount of debt that the circuit court will be dealing with will be up to €38,092.14, then it will be well worth it to get a legal professional on the case.

If the debt is defended and contested then it goes to court hearing and assuming you win an award you can obtain the court order from the County Registrar.

And just like the debt collection procedure for the district court, you can get the sheriff for the area to execute the court order.

High Court (sums greater than €38,092.14)

To carry out your debt collection for sums of this magnitude you must issue a High Court Summary Summons.

Assuming that no appearance has been entered by your creditor then you can proceed to lodge the necessary papers with the Central Office of the High Court judgments section which will allow you to obtain judgment in default of appearance.

This is a technical and demanding process which will require the assistance of a solicitor.

Once judgment has been obtained it should firstly be served on the defendant. Judgments of all courts can then be registered in the Central Office of the High Court and will appear in trade gazettes such as Stubb’s Gazette.

This prospect of adverse publicity can encourage a creditor to pay you promptly.

There are various procedures then for summoning before the appropriate court the debtor for the purposes of ascertaining what property and assets the debtor owns. This is a similar procedure which occurs in relation to bankruptcy.

If and when you obtain a court order or judgment against your creditor in your debt collection process another further step is to obtain a judgment mortgage on some valuable property of the creditor.

Judgment Mortgage

It is possible to register a judgment mortgage on property of the debtor, even the family home. You can then apply to the appropriate court to force the sale of the house and get paid out of the proceeds.

However the courts are reluctant to force the sale of the family home. It is important to realise that a judgment mortgage can be registered on a family home even without the consent of the non debt owing spouse.

To obtain the judgment mortgage you need to go to the appropriate court and file various documents such as details of the name of the cause, the names and addresses of the parties, the trades or professions of the parties, the location of the lands, the amount of the debt and costs and a statement from the party who is owed the money which must be sworn.

Once the judgment mortgage is obtained then it can be registered in the Land Registry or the Registry of Deeds.

Once the judgment mortgage is registered the creditor can issue proceedings for the sale of the property and if he is successful in this application then the court makes an order for sale and this sale is supervised by the Examiner of the High Court.

For this part of your debt collection procedure you will generally need the help of a solicitor. But for anyone involved in small business it is no burden to carry to understand how the debt collection process works and your role in it.

Execution Order

The execution order occurs in the latter phase of debt collection. And this is after you have obtained a court order for the debt due to you.

In this scenario you apply to the relevant court for an execution order which, if granted, is sent to the Sheriff for execution. The sheriff then writes to the debtor and has a duty to execute the execution order within a reasonable time.

He has the power to seize all the debtors’ moveable goods and has a right of entry into premises but he must not use violence and must have reasonable grounds for believing that there are defaulter’s goods on the premises.
You will then be in a position to hand over that decree to the sheriff for the area and he must attempt to execute it on your behalf.

An execution order is valid for 12 months but often if the debtor has no goods to seize then the sheriff will return the execution order to the creditor marked ‘nulla bona’ which essentially means ‘no goods’.

However nowadays this procedure can be ineffective in practice as a lot of goods will be leased or supplied to the debtor with retention of title clauses in the contract or on a sale or return basis.

However the existence of bankruptcy proceedings, receivership or liquidation complicates things and the Official Assignee in bankruptcy, the receiver or liquidator all have priority. So whilst some debt collection procedures are relatively straightforward, some will need the assistance of a solicitor.

Attachment and Committal

This is a process where a debtor fails to abide by the terms of an instalment order (an order to pay a certain amount laid down by the court) then you can apply to the District court for an order of committal ie an order for arrest and imprisonment.

To apply for this order the you will need to lodge with the court the instalment order and a declaration of its service on the creditor.

However if the creditors failure is due to hardship or inability to pay the Judge will seldom grant a committal order.

Attachments of Debts(Garnishee)

Another feature of the debt collection procedure is a fairly uncommon procedure called a Garnishee.

This occurs where the creditor has no assets apart from debts due to him, then you can apply to have those debts paid to him instead. This can also occur in relation to balances in the creditors bank account, wages due to him and any other sums due to him.

Appointment of Receiver

Both the High court and the Circuit court have the power to appoint a receiver over a judgment debtor’s property to enforce a judgment. When the receiver takes possession it is held for the court who directs what shall be done with it. The receiver has the powers which are given to him by the court.

Bankruptcy

Another, and last resort procedure, in your debt collection may involve issuing bankruptcy proceedings.

If you are intending to issuing bankruptcy proceedings against a creditor you should bear in mind the following

You gain no priority in relation to your debt

Preferential claims will still be paid first ie employees, Revenue Commissioners etc.

Bankruptcy summons will only be granted by the High Court where all other avenues have been exhausted

The Bankruptcy Act 1988 provides 2 methods by which a debtor can make a formal arrangement with his creditors

A private arrangement under the control of the court which is very similar to an examinership process for companies.

This involves the debtor setting out the reasons why he is unable to pay his debts and requesting protection from proceedings including Bankruptcy.

When the protection order has been granted the debtor will meet with his creditors and make an offer to them.

If three fifths of the creditors in number and value accept the offer, it is deemed to be accepted

Private arrangement outside the court. This is a matter of contract between the debtor and his creditors and needs the support of all creditors.

Companies

Where you are owed money by a company and you know the company is insolvent then you can petition the High Court to wind up the company (section 213 procedure). This can be an effective debt collection procedure, although the courts do not like to see it used until all other debt collection avenues have been explored first.

To do this you serve a 21 day demand letter on the company; if the debt is not paid within this period the debtor is free to petition for the winding up. Again the petitioner’s debt ranks behind preferential creditors such as employees and the Revenue Commissioners.

Pursuing debt collection against a company

1. Obtain a judgement against the company by way of “summons for liquidated debt”, the amount of debt determines in what Court the summons is issued
2. Have the judgement executed by the sheriff or the county registrar
3. Have the judgement registered in the High Court which will result in publication in Stubb’s Gazette, potentially affecting debtor’s credit rating
4. Lodge an affidavit with the Property Registration Authority registering the judgement against the debtor’s property.
5. Obtain a Court Order that the company has wilfully defaulted on the payment of its debt.

The Courts have broad powers including the seizure of the company’s assets,the director’s personal assets and even the imprisonment of the debtor.This option can be expensive and difficult to prove, and the Courts may take the less stringent approach of for example a stay to allow the debtor pay.

Apply to the High Court, where the company is unable to pay its debts but is not in liquidation for a wide range of reliefs, including arrest, seizure of assets,imposition of personal liability and assessment for damages.

Apply to the High Court to have the company put into liquidation.

Conclusion

Debt collection procedures can range from the relatively straightforward to the more complex. You will find many useful resources though to assist you in your debt collection efforts.

And your local district court is a good starting point.If you don’t feel comfortable pursuing your own debt collection then you should check out debt collection solicitors who will pursue the matter on your behalf.