User:Jodon1971/Bankruptcy in the Republic of Ireland

This is a general outline of Bankruptcy in Ireland. For a detailed look at the legal aspects of Bankruptcy in Ireland see Bankruptcy Law in the Republic of Ireland

Bankruptcy in the Republic of Ireland is a State supervised legal process that applies to natural persons who have been adjudicated bankrupt in Ireland. It has its orgins in English Bankruptcy Law. Like in most countries, Bankruptcy in Ireland has had a negative sociological impact, often resulting in marital dissolution or even suicides. Unlike most countries, it features as a significant factor in Bankruptcy tourism. It has in recent years met with considerable criticism and proposals for reform.

Definition and legal aspects

Main article: Bankruptcy Law in the Republic of Ireland

Bankruptcy is a legal process whereby the assets of a personal debtor are frozen by the State in order to distribute them amongst his or her creditors in cases where the debtor is unable or unwilling to pay his or her debts. It is supervised by the High Court in the capacity of a statutory body called the Office of the Official Assignee. Bankruptcy in Ireland applies only to natural persons. Other insolvency processes including liquidation and examinership are used to deal with corporate insolvency.

The essence of bankruptcy is that the debtor's assets are transferred to an official who administers and realises them for the benefit of all creditors. The purpose is to release the debtor from an unsustainable debt burden and to distribute his assets amongst all creditors equally (although certain types of creditor enjoy priorities).

A bankrupt is a debtor who has been adjudicated and declared bankrupt by the High Court's assessment that the debtor has "committed an act of bankruptcy". Once a debtor is adjudicated bankrupt, bankruptcy law provides for the mandatory vesting of all of the bankrupt's assets and property in the Official Assignee. Under the supervision of the Court, the OA will realise the bankrupt's assets and distribute the assets according to law among the bankrupt's creditors. The Official Assignee can challenge and set aside pre-bankruptcy transactions by the bankrupt to make the assets, the subject of those transactions, available to the creditors.

The bankrupt person is subject to restrictions and disabilities on trading and on obtaining credit while a bankrupt but leaves the process with their debts forgiven.

Types of Bankruptcy

There are 2 types of Bankruptcy in Ireland, again derived from English Law. They are Voluntary Bankruptcy and Involuntary (ex parte) Bankruptcy. Both types are instigated by a legal document known as a "petition". :Most people think of bankruptcy as a voluntary process.

• Voluntary Bankruptcy -

• Involuntary (ex parte) Bankruptcy -

Pre-bankruptcy criteria

In order for a person to be made bankrupt in Ireland, certain criteria need to be fulfilled. Up until 2012, it was required that the debtor owed at least €1,500 (or £1,000 in Irish Punts) to either one or more creditors. If the amount owed was less than that then the debtor was not eligible for bankruptcy.

History of bankruptcy law in Ireland

Ancient Irish Law had no provision for "bankruptcy" as understood by the modern sense of the term.

The term "bankruptcy" was first used in Ireland when in (year), under British Rule, King Henry VIII imposed British Laws on Ireland.

Up until 1988, the statute that was used in Ireland for Bankruptcy was the (English Bankruptcy Act) of 1857. This Act was established while Ireland was still under British Rule. The Act was identcal to the English B Act in everything but name. Since 1857, Britain has revised their own B Act more than a dozen times, while in Ireland only twice, once in 1988, and then again in 2012.

When Ireland was made an independent State in 1922, by default it imported the 1857 English Bankruptcy Act under a previous political dominion (pre-1922) which no longer existed (post-1922). When the Irish Constitution was being drafted from 1922-1937, the drafters of the Constitution failed to make a new Irish Bankruptcy Act which corresponded whith its new political dominion. They instead used one that existed from when Ireland was under British rule and imposed it using the Statute of Enactments Act 1922, which took on board all the Acts that were in existence in Ireland under the British Monarch. There was no amendment since 1922 until 1988 which meant that someone who was made bankrupt in 1987 was done so under an Act that was not only 130 years old, but also by one from a different country. The reason for this is unclear, but it is thought that the number of bankruptcies that arose in Ireland was too small to warrant serious legistative attention or revision to the Act.

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(A good history of Irish bankruptcy law from 1857 to 1900 can be derived from The Law and Practice Relating to Bankruptcy in Ireland, Kisby, Hodges Figgis, 1900, and the history up to 1986 can be found in the Budd report (referenced in the article), if anybody is minded to write an article on the history of bankruptcy in Ireland)

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Sociological effects of bankruptcy in Ireland

"Bankruptcy is a highly specialised subject of which few people (including lawyers) have more than a superficial knowledge." - The Bankruptcy Law Committee Report 1.13.1

Bankruptcy tourism in Ireland

See also Bankruptcy tourism

In the wake of the bursting of the Irish property bubble, commentators have noted the appearance of bankruptcy tourism where Irish debtors move to other jurisdictions such as Great Britain to avail of more lenient bankruptcy laws. The attraction for insolvent Irish people dealing with fallout from the worst economic crisis in the country’s modern history is simple. In Ireland, it takes 12 years for a debtor to emerge from bankruptcy, compared with a maximum of 12 months in Britain.

The most prominent cases of alleged bankruptcy tourism are perhaps those of David Drumm former chief executive of Anglo Irish Bank and property developer John Fleming. Fleming, who had personally guaranteed much of the €1 billion debt of Tivway and associated companies in Ireland, was discharged from bankruptcy in the UK on 10 November 2011, the anniversary of the date on which he was declared bankrupt there. Former government minister Ivan Yates, who has described the Irish bankruptcy regime as "purgatory", publically announced contemplating moving to the UK to avail of its bankruptcy regime. Shane Filan, the lead singer in the band Westlife, chose in June 2012 to go bankrupt in London rather than Dublin.

One UK-based insolvency solicitor, Steve Thatcher, claimed in 2012 that he had recently written off €1bn in Irish debt for his Irish clients in the UK in only eighteen months. Though Thatcher dismisses the validity of the term 'bankruptcy tourism' and instead calls it 'bankruptcy emigration' as he says people have to emigrate to the UK to go bankrupt, with the majority of his clients remaining in the UK once their bankruptcy is complete.

The high level of Irish debt being written off in the UK has prompted the government there to seek to have EU law amended to make it harder for Irish residents to move to the UK and take advantage of more lenient bankruptcy laws there.

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Criticism and Proposals for reform

See also Bankruptcy_Law_in_the_Republic_of_Ireland#Recent_reform_and_further_proposals

Irish Bankruptcy laws have been the subject of sustained criticism both regarding the complexity of the process and the minimum length of time (12 years, until amended in 2011) taken to purge bankruptcy where all of the debts of the bankrupt have not been discharged. Irish bankruptcy law has been the subject of significant recent comment, from both government sources and the media, as being in need of reform.

The Law Reform Commission published an interim report on Personal Debt Management and Debt Enforcement (LRC 96-2010). From the perspective of bankruptcy law the main recommendations of this report include an automatic discharge from bankruptcy after 3 years (subject to debtor's assets remaining in the bankruptcy and the Official Assignee being permitted to require the bankrupt to make payments for up to 5 years), an increase in the level of debt required to bring a creditor's petition to €50,000 and a reduction in the range of priority debts in bankruptcy.

The government committed to reform personal insolvency law in a memorandum of understanding with the EU and the International Monetary Fund. Part 7 of the Civil Law (Miscellaneous Provisions) Act 2011 started this process and while not going as far as proposed in the Law Reform Commission Report, it made substantial amendments to the Bankruptcy Act 1988 including the minimum period before a bankrupt can seek a discharge from bankruptcy, where the debts have not been paid in full, was decreased from 12 years to 5 years.

New Personal Insolvency Act

On 24 January 2012 the Department of Justice and Equality published the Draft General Scheme of a new personal insolvency bill. The proposed bill would, among other things, reduce the period of bankruptcy to 3 years, raise the threshold of debt for bankruptcy to €20,000, and introduce three different non-judicial mechanisms to deal with debt. The proposed bill was part of the government's plan to provide relief to indebted homeowners following the recession.

On 29 June 2012 the Irish Government published the text of the bill.

The Personal Insolvency Act 2012 was signed by the President on 26 December 2012 and the Minister indicated that he expects licensing of personal isolvency practitioners to take place in April/May 2012 but did not indicate when he expected the first debtors would utilise the new insolvency mechanisms.

See also

• Bankruptcy
• Bankruptcy Law in the Republic of Ireland
• Bankruptcy tourism