ANALYSIS:In Ireland, unlike the UK or US, a person cannot be discharged from bankruptcy for 12 years, writes CAROL COULTER
UNTIL THIS year, the number of bankruptcies in Ireland was in single figures annually, compared with the UK, where it runs to tens of thousands, and the US, where there is about a million annually. In 2008 there were eight in this jurisdiction, compared with 1,082 in Northern Ireland.
Traditionally in Ireland there has been a stigma associated with bankruptcy, and the courts have seen it as a recourse of last resort for creditors. The economic downturn means bankruptcies are likely to increase, though not to UK levels.
There are various reasons why bankruptcy is such a rarely-used option here, including the fact that, once entered, it is very difficult to get out of; the stigma still associated with it and the intimate nature of Irish society.
The basis for becoming bankrupt is an “act of bankruptcy” under the Bankruptcy Act 1988, most commonly a failure to pay a debt of over €1,900 within 14 days of receiving a bankruptcy summons requesting its payment. This leads to all property, with the exception of necessaries up to a value of €3,100, being taken over by the Official Assignee.
The family home, if wholly or partly owned by the bankrupt, is part of the property taken over, but its disposal is subject to the terms of the Family Home Protection Act. This does not protect it from sale to meet the debts, but the court can have regard to the interests of a spouse and children as well as the creditors, and can make a stay on the sale of the family home that can continue for years. In the UK a stay on the sale of the family home can only last a year.
Bankrupt persons can work or engage in business, but they face considerable restrictions on their business activity. They can only obtain credit up to €625 without disclosing the bankruptcy; they must operate under their own name; they cannot act as a director of a company or take part in its management, and cannot be elected to public office. The Official Assignee must be notified by the bankrupt person of any profession or business in which he or she is engaged.
The court can summon any person whom it considers capable of giving information relating to the “trade, dealings, affairs or property of the bankrupt” and require them to give information about them, to ensure that property or income is not being hidden. If a person is suspected of attempting to leave the State in order to avoid bankruptcy, he or she can be arrested.
The Bankruptcy Inspector, an official within the Office of the Official Assignee, can search any premises in which he considers property belonging to the bankrupt may be hidden.
In Ireland, unlike the UK or the US, a person cannot be discharged from bankruptcy for 12 years, when all the preferential payments have been made and all other creditors have received at least 50 per cent of the debts. The bankruptcy can be discharged earlier only when the debts have been paid in full, along with all the expenses associated with the bankruptcy, and the creditors’ consent. An alternative to bankruptcy is a court-supervised arrangement whereby the court grants protection to the debtor against his creditors, while supervising a payment regime.