New bankruptcy regime within the week

Current bankrupts will be discharged next summer under new bankruptcy rules

The new legislation will mean bankrupts can be automatically discharged from bankruptcy in three years, down from 12 years at present
The new legislation will mean bankrupts can be automatically discharged from bankruptcy in three years, down from 12 years at present

Changes in bankruptcy legislation that will reduce the length of time a person remains in bankruptcy are to be introduced within the next seven days.

Minister for Justice Alan Shatter, currently in Lebanon, is expected to sign the commencement order for section 4 of the Personal Insolvency Act 2012 dealing with bankruptcy on his return.


Three years
The new legislation will mean bankrupts can be automatically discharged from bankruptcy in three years, down from 12 years at present, although it does include a clause to require the bankrupt to pay a contribution from their income for five years in certain circumstances.

It will also increase the level of debt required to make a person bankrupt. A debtor must owe a creditor €20,000 under the new system before he or she can be forced into bankruptcy or make a petition to declare themselves bankrupt, compared with €1,900 currently.

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When a High Court action for bankruptcy is being brought by an individual on their own behalf, the new legislation also requires they make a sworn statement, namely an affidavit.

Among other things, the affidavit must state that before the application for bankruptcy was made, the debtor made efforts to reach an agreement with their creditors using a personal-insolvency or debt-settlement arrangement, new schemes for dealing with insolvency available under the Personal Insolvency Act 2012.

There will also be changes to the value of assets exempted from being seized by the official assignee, a court-appointed trustee who controls the assets and deals with the creditors of a bankrupt. Household furniture or tools and equipment required for the bankrupt’s occupation up to the value of €6,000 will be exempt, a doubling of the current threshold.

Most pensions will also be exempt from being taken over by the official assignee, although if a debtor is due to receive an income from a pension for up to five years after being adjudicated a bankrupt, then that income will be taken over and distributed to creditors.


"Excessive contributions"
If a person made "excessive pension contributions" for up to three years before they became a bankrupt, the court can order the excess be paid to the official assignee and distributed to creditors.

The new legislation will also affect people who have already been declared bankrupt. Once it is under way, anyone who was declared bankrupt three years ago or more will be automatically discharged from bankruptcy next summer.

Fiona Gartland

Fiona Gartland

Fiona Gartland is a crime writer and former Irish Times journalist