You have looked at all the options-the new insolvency legislation and debt settlement arrangements.
You’ve decided bankruptcy is for you. It’s your only realistic option.
But how do you actually go bankrupt?
What forms do you fill out?
Where do you send them?
How much will bankruptcy cost?
How to go bankrupt-step by step
Firstly, you need to transfer €650 to the Official Assignee in the Bankruptcy Division of the Insolvency of Ireland.
All bankruptcy applications are then commenced in the Examiners Office in the High Court. This office is located on the 2nd floor of Phoenix House, Phoenix Street North, Smithfield, Dublin 7.
You must then fill out certain forms:
1. A Petition for Bankruptcy (form number 13, appendix O, Rules of the Superior Courts) and a Grounding Affidavit
2. Form number 23-a Statement of Affairs
3. Form no. 15-an Order of Adjudication
4. A Warrant of Seizure (form 46) and
5. A Notice of Adjudication and Statutory Sitting (form number 19).
Once you have filled out these forms you need to send them along with 3 copies of each and the receipt for the €650 (which you have paid to the Insolvency Service of Ireland) to the Examiner’s Office.
The information you put in these documents-the Petition and Statement of Affairs- must be sworn to. That is the purpose of the Grounding Affidavit. (An Affidavit is a written, signed, and sworn statement which formally affirms the contents of the statement are true).
If the Examiner’s Office is satisfied that the forms have been filled out correctly then you will be given a Court date.
There is stamp duty required though on some of the documents: €190 on your Petition and €20 on the grounding affidavit.
The Statement of Affairs is a detailed statement of your assets, liabilities, income, etc.
When you’re in Court
When you go to Court the Judge may have some questions for you about your Statement of Affairs or your application for bankruptcy. So you might want to bring supporting documentation, where appropriate.
When in Court you should
• Request that the Notice of Adjudication and Statutory Sitting be published on the ISI (Insolvency Service of Ireland) website rather than having it published in a national newspaper. It’s a lot cheaper
• Request the Court to fix a date for the Statutory Sitting for your case
• Request that the requirement to file a Statement of Affairs under section 19(c) of the Bankruptcy Act, 1988 be dispensed with as you will have filed a Statement of Affairs (form 23 above).
At the Statutory Sitting, the 2nd date you will have to attend the High Court, yon will be adjudicated bankrupt provided you satisfy all the requirements and your papers are in order.
The Statutory Sitting also gives your creditors the opportunity to make a claim.
The Judge will then sign the Order of Adjudication.
The Warrant of Seizure then gives the power to the Bankruptcy Inspector to seize your property. This can be useful if some of your property is in the possession of someone who will not hand it over.
Once you are made bankrupt you must co-operate with the Official Assignee and will attend his office for an interview. You will also have to deliver to him the title deeds to your property (if you have any) and any relevant documents or accounts.
Once you co-operate with the Official Assignee you will be discharged from bankruptcy after 3 years and all your debts will have been written off.
There used to be a stigma attaching to bankruptcy in Ireland. Now more and more people are realising that it may be the best option for them and that there is no shame in going bankrupt-some of the most successful people in history went bankrupt.
At least once.
Some many times eg Donald Trump four times-1991, 1992, 2004 and 2009. Peter Stringfellow, Larry King. Oscar Wilde, Shane Filan. George Best.Marvin Gaye. Walt Disney.
If you are thinking about going bankrupt in Ireland, this piece will give you the essential information you will need.
Elsewhere on this site you can find more information about bankruptcy law in Ireland.
But this piece aims to give you the meat and potatoes of what’s involved in you choosing to go bankrupt and the procedure involved.
I am assuming you are the one who is choosing to go bankrupt.
This is a “debtor’s bankruptcy”. (A creditor’s bankruptcy is where a creditor of yours chooses to apply to have you made bankrupt-that procedure is covered elsewhere on the site).
Firstly, before applying for bankruptcy you need to explore the alternative solutions available to you courtesy of the Personal Insolvency Act, 2012:
A debt settlement arrangement or
A personal insolvency arrangement.
To apply for bankruptcy you don’t need a solicitor. But you would be well advised to engage one because
It is a High Court application by way of a Petition verified by an Affidavit and Statement of Affairs and
You need legal advice to confirm that bankruptcy is the right option for you.
There are 2 key offices you need to know about:
The Office of the Examiner of the High Court. Your application for a bankruptcy order is filed in this office in the first instance.
This office is an office of the High Court.
2. The Official Assignee’s office. After your bankruptcy order is granted you will deal with the Official Assignee’s office.
The official assignee is an independent statutory officer of Court who administers your estate once you have been declared bankrupt.
Consequences of Bankruptcy
The main consequences of bankruptcy are:
Your debts are wiped out
All your property transfers to the Official Assignee (The only assets that do not transfer to the Official Assignee are essential assets up to a value of € 6,000 (including vehicles), or more, if the High Court allows.
You are discharged from bankruptcy after 3 years
You must contribute from your surplus income towards your debts for up to 5 years
The Official Assignee receives and deals with the claims of your creditors-they can no longer contact you
The Official Assignee administers your estate.
Eligibility for Bankruptcy
To be eligible for bankruptcy you must fulfil the following conditions:
I. You must be insolvent
II. You must lodge €650 with the Insolvency Service of Ireland
III. You must swear an affidavit that you have made reasonable efforts to use the alternative debt settlement arrangements open to you-the debt settlement arrangement and the personal insolvency arrangement
IV. Your debts must exceed your assets by more than €20,000 and you must present a Statement of Affairs setting out your financial position
V. You must prepare a petition for bankruptcy.
The fees for bankruptcy are
€650 for the Insolvency Service of Ireland
Stamp duty on the petition and affidavit of €102.50.
As I write this you would also have an advertising fee for a national newspaper of approximately €500 to advertise your petition for bankruptcy. However this is almost certain to change as the Companies (Miscellaneous Provisions) Bill 2013, if passed into law, will do away with the requirement for advertising.
Your Duties re Your Bankruptcy
You will have to attend the High Court on the day your application for bankruptcy is listed; you will have to attend again on the Statutory Court Sitting date.
You also have to cooperate fully with the Official Assignee; attend the bankruptcy division of the Personal Insolvency of Ireland on the day you are made bankrupt.
You will also have to attend for interview with the Official Assignee’s office.
The Official Assignee will look for a contribution from your surplus income, if any, after deduction of reasonable living expenses.
Your pension is not transferred to the Official Assignee.
The Family Home in Bankruptcy?
Your share of the family home will transfer to the Official Assignee. You may be able to agree a schedule of mortgage repayments with your bank, provided the Official Assignee agrees that these payments are within reasonable living expenses and not for some exorbitant pile with eye watering mortgage payments.
The Official Assignee cannot sell the family home without first obtaining the consent of the High Court. The High Court will consider each case on its merits and look at your creditors, your spouse’s/civil partner’s situation, and your dependents.
If there is equity in the family home the Official Assignee will seek to sell his share to your spouse/civil partner.
If there is no equity the Oficial Assignee will consider the sale of his share to your spouse/civil partner.
Discharge from Bankruptcy
You should be discharged after 3 years.
This period could be extended if you don’t cooperate with the Official Assignee or you fail to disclose all of your property.
The Personal Insolvency Act, 2012 has been hailed as a solution to the debt problems faced by many individuals and families in Ireland.
That remains to be seen.
But we will have a better idea when the Insolvency Service of Ireland is up and running and the first applications for Debt Relief Notices (DRN), Debt Settlement Arrangements (DSA), and Personal Insolvency Arrangements (PIA) are made.
An industry appears to have sprung up around the massive demand from ordinary citizens struggling with unsustainable debts. Do a simple Google search for “insolvency ireland” and you will see a plethora of ads offering “debt solutions” , “free impartial advice”, “debt mediation”, “bankruptcy in the UK”, etc.
Let’s take a look at the options to be found in the Personal Insolvency Act, 2012 first:
they are a debt relief notice (DRN), a debt settlement arrangement (DSA), and a personal insolvency arrangement (PIA).
Debt Relief Notice (DRN)
This is suitable where
you have few or any assets (less than 400 euros)
debts below 20,000 euros
and a low income.
A DRN arrangement is permitted for both secured and unsecured debts and is arranged through an Approved Intermediary (AI) rather than a PIP (personal insolvency practitioner). The Money Advice and Budgeting Service (MABS) is an approved intermediary (AI) for a DRN.
The DRN arrangement will normally last for 3 years and provided you stick to the agreed arrangement, you will be debt free at the end of it. (You could be finished earlier also if you pay back 50% of what you owe)
During the duration of the arrangement, your creditors cannot pursue you as they will have agreed to the arrangement.
Your name will be entered on the Register of Debt Relief Notices which is publically viewable by anyone who wishes to view it. It will include your name, address, year of birth and the date of the DRN.
As with all 3 of these personal insolvency solutions, you are only entitled to one in a lifetime.
A debt settlement arrangement (DSA) is for unsecured debts only in excess of 20,000 euros and is arranged through a PIP (personal insolvency practitioner).
A debt settlement arrangement will last for 5/6 years and once you have stuck to the arrangement the balance of your unsecured debts will be written off at the end of the 5/6 years. You will also be protected from further legal action from your creditors for the lifetime of the DSA.
Your application for a DSA is made to the Insolvency Service of Ireland and brought to Court for approval. If approved, your PIP will put a proposal to your creditors. You need to have the agreement of 65% of your creditors and if you do, the arrangement goes back to the ISI and Court for final approval.
As with the other personal insolvency “solutions”, you can only get one per lifetime and the details are entered on the public Register of Debt Relief Notices.
The PIA allows you to restructure your debts over 6/7 years and includes both secured (mortgages for example) and unsecured debts. It is for debtors with debts between 20,000 and 3,000,000.
The Personal Insolvency Arrangement is similar to the debt settlement arrangement (DSA) insofar as you need the agreement of 65% of your creditors, you need to apply for one to the Insolvency Service of Ireland through a PIP and the arrangement must be approved by the ISI and Court.
(2) Where the debtor has complied with his or her obligations under the Personal Insolvency Arrangement, subject to the provisions of section 99(2), and 102 (3) and (7) the debtor stands discharged from the unsecured debts specified in the Personal Insolvency Arrangement.
(3) Where the debtor has complied with his or her obligations under the Personal Insolvency Arrangement, the debtor shall not stand discharged from the secured debts covered by the Arrangement except to the extent specified in the Personal Insolvency Arrangement.
Interestingly as subsection 3 above states:
the debtor shall not stand discharged from the secured debts covered by the Arrangement except to the extent specified in the Personal Insolvency Arrangement.
Protection for Secured Creditors in a Personal Insolvency Arrangement
Section 103 contains a bit of a sting in the tail as it provides, inter alia,
(11) The obligation to pay an additional amount arising by virtue of this section shall cease—
(a) on the expiry of the period of 20 years commencing on the date on which the Personal Insolvency Arrangement comes into effect, or
(b) on the day on which the debtor is scheduled or permitted to fully discharge the amount secured by the security (or such later date as may be specified for so doing in the Personal Insolvency Arrangement) and does so discharge his or her indebtedness,
whichever first occurs.
Reasonable Living Expenses
All of the arrangements above allow for “reasonable living expenses” and the Insolvency Service of Ireland have issued guidelines and a booklet as to what “reasonable living expenses” are. Click here to read the booklet.
What happens if you don’t stick to the arrangement? The creditors can void the arrangement and pursue you.
With any of the arrangements above you will have to give access to all your bank details and data.
PIPs are likely to charge an initial fee to get the ball rolling and expect to recover the rest of their fee over the lifetime of the arrangement. When choosing a PIP you are not permitted to engage a person with whom you have previously had a relationship with, for example an accountant or solicitor who you have used in the past and who are now personal insolvency practitioners.
Choosing a PIP is an important decision because you will have a relationship with them for 5 or 6 years and it is likely that the quality of PIPs will vary as in all professions.
What Does the PIP Do?
If you are suitable to enter a debt settlement arrangement or a personal insolvency arrangement the PIP will assist you in drawing up a prescribed financial statement (PFS). He will then draw up a proposal to be sent to the Insolvency Service of Ireland, present this proposal (if approved by the ISI and Court) to creditors and if agreed to, will carry out annual reviews until completion of the arrangement after the 5 or 6 years expected duration.
The bulk of the PIP’s fee is likely to be collected over the lifetime of the arrangement but there will be an upfront fee element also which presumably will vary from PIP to PIP. There is no set fee and PIPs are free to set their own rate.
The ISI will maintain a register of Approved Intermediaries (AI) and Personal Insolvency Practitioners (PIP) which you can access on the ISI website.
Register of PIPs
The Insolvency Service of Ireland will maintain various registers, one of which is a register of Professional Insolvency Practitioners (PIPs) which can be viewed here.
David Hall of the Irish Mortgage Holders Association has made some interesting comments about PIPs, according to the Irish Times,
David Hall of the Irish Mortgage Holders’ Association described the number of applicants for registration as Pips and intermediaries as “pathetic given the volumes that were expected to be involved. The biggest single concern with fewer Pips is going to be it will become an elitist, expensive racket.”
He said it had “all the hallmarks of becoming a money up-front service” that would “advantage those who have some money to pay a Pip”. Source: July 15th, 2013, Irish Times
What you might find most interesting about these comments is that I am almost certain I recently heard Mr. Hall being interviewed on Radio 1 recently and confirming that he had applied to become a PIP and was awaiting registration.
Other debt relief options include bankruptcy in Ireland which can be applied to Court for around 750 euros.
A negotiated debt settlement is also an option. Problems with paperwork and technical legal defences which are founded on errors in the loan documents and paperwork of some financial institutions can offer a strong negotiating position for the debtor.
During the lending frenzy of the Celtic Tiger years, many financial institutions were so busy churning out loans that the boring, legal housekeeping work in relation to loan documents and form filling was rushed, and in some cases fatally flawed.
Entering a debt settlement arrangement(DSA) or personal insolvency arrangement (PIA) in these circumstances may not be your best option. And your PIP may not have the legal expertise or the time to scrutinise your loan documentation to uncover any such fatal errors.
Remember, a PIP could be an accountant or financial advisor without the necessary legal training to uncover legal flaws which will place a question mark over the enforceability of the loan.
A mediated debt settlement has some attractions over the arrangements set out in the Personal Insolvency act, 2012 including:
confidentiality and no public naming
no annual review by a PIP
no confusion about whether your PIP is favouring your interests or those of your creditors
no “reasonable living expenses” restrictions.
1. Bankruptcy in Ireland
Bankruptcy is another option to be considered, depending on your particular circumstances.
Prior to the Personal Insolvency Act, 2012 the bankruptcy option in Ireland was one of the most prohibitive and draconian in the world as it was almost certainly to last for at least 12 years before discharge.
Bankruptcy in the UK has been utilized by many high profile Irish property developers and others in the last few years. There has also been high profile legal actions involving the bankruptcy or attempted bankruptcy of Sean Quinn, solicitor Brian O’Donnell and his wife Dr. Mary Pat O’Donnell, Ray Grehan, Bernard McNamara, Tom McFeely, John Fleming, Paddy Shovlin, and many others.
The reason for this is quite simple: bankruptcy in the UK is a much more attractive option as it can allow discharge from bankruptcy after 12 months.
Other differences between bankruptcy in Ireland and in the UK are
you remain on the bankruptcy register in Ireland for your lifetime but in the UK for only 3 years
you must advertise your proposed bankruptcy in Ireland but there is no requirement to do this in the UK
in Ireland your bankruptcy must be brought to open hearings in Court; this is not the case in the UK where your bankruptcy application is presented to Court for approval but you might never even see a Judge.
So, as you can see there are many options to be considered by debtors with no “one size fits all” solution.
It really will depend on your particular circumstances but one thing you need to be wary of is apparent guardian angels with a vested interest.
Update 31st August, 2013
It is reported in the Sunday Independent of 1st September, 2013 that former government minister Ivan Yates has just been discharged from bankruptcy by the UK Insolvency Service.
Bankruptcy is a commercial reality facing many people in Ireland today.
And the number of bankruptcies is increasing dramatically.
Because going bankrupt has the wonderful advantages of simplicity and finality-your debts are wiped and set at 0 and you get to start again, once you have been discharged.
What is bankruptcy?
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.
NOTE: the early part of this article was written in 2009 before the new Personal Insolvency Act, 2012 which changed considerably the procedure surrounding bankruptcy in Ireland. You will find an update at the end of this page to reflect the law surrounding bankruptcy after the Personal Insolvency Act, 2012. But the consequences of bankruptcy, what happens your property, the family home, employment, operation of bank accounts, etc. remained broadly unchanged. The biggest change was the reduction in time in order to become discharged from bankruptcy from 12 years to 3 years.
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.
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 or put 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.
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.
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:(NOTE: this has changed now with the new Personal Insolvency legislation, 2012)
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.
The register is a record of all bankruptcies, including those that have been discharged.
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.
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.
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.
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.
While the new arrangement and earlier discharge period is much more attractive than the old and antiquated bankruptcy laws in Ireland, it is still not ideal and you will need to have at least €650 in cash to give the Official Assignee and assets of €1,904.61.
How to Go Bankrupt
Choosing to go bankrupt will involve petitioning the High Court, lodging €650 with the Official Assignee, and filing a statement of affairs once you have been adjudicated bankrupt.
The rules for a bankruptcy petition by a debtor are:
26. (1) A debtor’s petition shall be in theForm No. 13and shall:
(a) contain an undertaking by the debtor to attend in person at the statutory sitting;
(b) contain an undertaking by the debtor to advertise notice of the adjudication and statutory sitting in the manner directed by the Court and to bear the expenses of such advertisement;
(c) contain an undertaking by the debtor to lodge such sums, if any, as the Court may from time to time direct to cover the costs, fees and expenses incurred or to be incurred by the Official Assignee;
(d) contain: (i) statements that the Insolvency Regulation applies to the proceedings and that the debtor’s centre of main interests is situated in the State and the facts and grounds supporting each statement; or
(ii) statements that the Insolvency Regulation applies to the proceedings, that the debtor’s centre of main interests is situated in another specified Member State and that the debtor has an establishment within the State and the facts and grounds supporting each statement; or
(iii) a statement that the Insolvency Regulation does not apply to the proceedings, and in such case, shall contain a statement that the debtor is domiciled in the State or that, within a year before the date of the presentation of the petition, he has ordinarily resided or had a dwellinghouse or place of business in the State, or that he has carried on business in the State personally or by means of an agent or manager, or that he 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 and the facts and grounds supporting that statement, and
(e) where the Insolvency Regulation applies to the proceedings, contain a statement that, to the debtor’s knowledge, no insolvency proceedings have been opened in respect of the debtor in any Member State or Member States (other than the State), or that such insolvency proceedings have been opened and if so, whether those insolvency proceedings are main proceedings, secondary proceedings or territorial proceedings.
(2) Where insolvency proceedings have been opened in another Member State, the affidavit verifying the petition shall exhibit a certified copy of the original decision appointing the liquidator or any other certificate of the court having jurisdiction (as referred to in Article 19 of the Insolvency Regulation) and if such decision or certificate is not in one of the official languages of the State, a translation of that decision or certificate into the Irish or the English language certified by a person competent and qualified for the purpose.
(3) The petition shall be supported by an affidavit, which may be endorsed on the petition, which shall verify the petition and shall verify the facts supporting every statement made for the purposes of sub-rule (1)(d).
26A. (1) This rule applies only where the centre of the debtor’s main interests is situated within the territory of a Member State other than the State.
(2) In a case to which this rule applies, the petition shall also:
(i) identify the place within the State where the debtor has an establishment and the facts and grounds supporting that statement;
(ii) where main proceedings have not been opened in another Member State, contain a statement as to which of the conditions referred to in Article 3(4)(a) or Article 3(4)(b) of the Insolvency Regulation is met and the facts and grounds supporting that statement.
(3) The affidavit verifying the petition shall verify the facts supporting every statement made for the purposes of sub-rule (2).
27. A petition of bankruptcy by a debtor shall be supported by the affidavit of the debtor setting forth the particulars of his assets and where the same are and the estimated value thereof, in order that it shall be made to appear to the satisfaction of the Court that his available estate is sufficient to produce the sum of €1,904.61 at the least, and if required he shall produce satisfactory evidence of the value of such assets.
Debt collection in Ireland is a serious problem today, both for creditor and debtor.
The pressure on the cash flow of many businesses and sole traders, especially with the banks in Ireland effectively closed to many SMEs, can lead very quickly to a major cash flow problem.
Common questions in relation to debt collection in Ireland are set out below.
If you need a solicitor, don’t hesitate to contact us through the form at the end of this page or simply use the contact numbers on our contact page.
The procedure for debt collection has changed slightly in 2014 because of the new jurisdiction limits for each court and a new procedure in the District Court involving a different procedure with a Claim rather than a Summons. Contact a solicitor to discuss.
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?
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.
A defendant can seek to have this decree set aside or varied on grounds of fraud, misrepresentation, surprise, mistake or other sufficient grounds.
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.
Enforcement of Judgments
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.
There is no monetary jurisdiction on the District Court when it comes to the enforcement of judgments.
So, regardless of which court judgment is obtained, it can be enforced in the District Court.
However, before attempting to enforce judgment there are a number of essential steps to be taken:
serve the judgment on the defendant. Personal service is required for an individual; for a company you can leave it at the registered office of the company or serve by post to that office.
registration of the judgment in the Central Office of the High Court. This is not essential but the threat of appearing in Stubbs Gazette and other trade journals can be an encouragement to the debtor.
examination of the debtor of the debtor as to means.
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.
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.
The law has changed in this area since the Monaghan Credit Union/Caroline McCann case-read more about attachment and committal here.
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.
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.
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.
Our demand letters, which demand payment within 7 days, are customized to your requirements.
We provide three types of 7 day demand letter which we describe as
What type of letter you choose will depend on your relationship with your debtor, how long the money is outstanding and your personal preference-you may for example decide that the softer versions is more appropriate in the first instance if you have built up a relationship with the debtor over some years.
Our correspondence fee will arise when a debtor contacts us in relation to the demand letter with a query or perhaps looking for additional documentation, an invoice or other information.
When this happens we refer the issue to you in the first instance.
If you wish us to deal with the debtor by way of correspondence and organising a payment plan, receipt of the payments, issuing receipts and forwarding the monies to you there will be a correspondence fee to cover this work which is not recoverable from the debtor in the absence of legal proceedings being issued.
Legal Fees in Defended cases
In defended cases, that is where a Notice of Intention to Defend or an Appearance is entered and the debtor contests the case, our fees will include the Professional fees set out below plus our hourly charge out rate which we will notify you of prior to commencing work.
You will of course receive a section 68 letter setting out our fees and expected outlays or the basis on which we will charge or an estimate of our fees prior to commencing work.
Each case will have its own particular character, level of expertise, skill and responsibility requirements and for this reason it is impossible to be absolutely definitive as to our fees in respect of defended cases.
Legal fees for enforcement of Judgments
To apply for an instalment order in the District Court for a Judgment already obtained or to bring committal proceedings our fee is €195 plus vat.
We can also
Register a Judgment mortgage and
Liaise with the Sheriff to have your judgment enforced.
Legal Fees in Undefended Cases
Our legal fees for obtaining judgment on your behalf in undefended cases in the various Courts are as follows:
APPROXIMATE RECOVERABLE COSTS
If you have any queries do not hesitate to contact us and you will find that we are approachable, responsive, professional and competitive.
Debt collection procedures can range from the relatively straightforward to the more complex.
There are a number of procedural (and other) considerations to think about before pursuing a debtor; the most important one is probably whether your debtor is a ‘mark’ or not.
This should be the first thing to consider before pursuing a debt as there is no sense in obtaining an order or judgment against a debtor if it is unenforceable.
We would be happy to advise you in this regard and any other debt issues you may have.
Note: In contentious business a solicitor may not calculate fees or other charges as a percentage or proportion of any award or settlement.
[flv:https://s3-eu-west-1.amazonaws.com/business-law/debt-collection-procedure-in-ireland.mp4 https://s3-eu-west-1.amazonaws.com/business-law/debt-collection-procedure-ireland.png 640 480]