First bankruptcies declared under new three-year regime

The first tranche of bankruptcies in the country under the new rules under which people can exit bankruptcy after three years have been adjudicated on at the High Court in Dublin.

Four people were declared bankrupt following their own application, and three were made bankrupt by a creditor on Monday before Mr Justice Brian McGovern, it has emerged.

All seven will avail of the shorter bankruptcy period introduced as part of the Personal Insolvency Act 2012. The term for automatic discharge was reduced from 12 years to three years by the legislation, which was enacted last week.

Other changes in the bankruptcy regime included an increase in the threshold of debt owed before bankruptcy can be declared from €1,900 to €20,000. An applicant must also show he has attempted to resolve his financial difficulties using one of the new personal insolvency arrangements, such as a debt settlement arrangement, before he can be declared bankrupt.

None of the four people who applied to be adjudicated bankrupt on Monday was represented by a barrister or solicitor.

Low income
Personal insolvency practitioner (Pip) Mitchell O'Brien, based in Waterford, said one of his clients was the first to be declared bankrupt under the new regime.

The young man had bought a home which subsequently fell into arrears and was “horrendously in negative equity”, Mr O’Brien said. He surrendered the property to the bank, but the bank was “not amenable to supporting a debt settlement arrangement” for the remaining debt owed, in the region of €200,000.

The man also had other small debts and, although he was working, he was on a low income and was insolvent. Mr O’Brien said his client wanted to get married and did not want to go into the marriage with legacy issues.

Though Pips cannot carry out the work of a solicitor or represent a bankruptcy applicant in court, they are licensed to provide advice on bankruptcy.

Assets
Mr O'Brien said if a personal insolvency or debt settlement arrangement does not work for a client, he "can't leave them out the door with nobody to help them". He said his office provides a secretarial service to help clients fill in bankruptcy forms and get documents lodged with the Examiner's Office. Once the case goes to court, a Pip can attend with an applicant as a "McKenzie friend", he said – a person who accompanies and advises a person in court.

They can also attend with a client when he is being interviewed at the official assignee’s office, the court appointed trustee who takes control of a bankrupt’s assets. Mr O’Brien said his charges are €2,000 per case, including a statutory sum of €650 that must be paid to the official assignee’s office.

“What we are trying to do is make sure everyone has access to a sustainable solution,” he said.