Personal Insolvency involves consideration of complex inter-connecting issues such as family homes, Codes of Conduct, pensions, personal guarantees, judgment mortgages, bankruptcy and many other issues.
We are experts in dealing with vulture funds, bank and landlords.
In some cases, an individual just needs time to sell assets in order to discharge his creditors in full. In such cases, it is relatively easy to obtain the creditors’ consent not to take legal action to allow time for assets to be sold. In other cases, the Debtor concerned would not have sufficient assets to discharge all of his creditors. Our approach to such cases is to propose an “Informal Scheme of Arrangement”, under which creditors agree to accept just a portion of their debt in full and final settlement. Our experience is that creditors are receptive to such schemes provided the following criteria are met:
In preparing an informal scheme of arrangement we consider all issues, including tax opportunities. For example, disposal of assets may be structured in such a way that Capital Gains are offset by Capital Losses etc.
In some cases a Members Voluntary Liquidation will release cash in order to pay creditors.
We also consider if any Personal Guarantees given are legally binding on the Debtor. In respect of investors who are facing significant cash calls as a result of their involvement in a property syndicate, we also carefully consider whether the investor might have a claim for negligence, breach of a bank’s facility letter, misrepresentation or abuse of a Power of Attorney.
Creditors will generally support a scheme of arrangement, as they will receive a greater return, over a much shorter period of time, than under a formal bankruptcy.
We regularly negotiate Informal Schemes of Arrangement (Debt Forgiveness) on behalf of individuals.
Nearly all Schemes of Arrangement done with creditors are done on an informal basis in this country. It was possible to organise a formal arrangement under the Bankruptcy Acts 1988 to 2011. However, all such formal arrangements were repealed by the Personal Bankruptcy Act 2012, and were replaced by three new arrangements, which are outlined below.
To be adjudicated Bankrupt the Debtor must have committed an “act of Bankruptcy”. These are defined in Section 7 subsection (1) of the Act. The act of Bankruptcy most commonly cited in Bankruptcy proceedings is Section 7(1) (f) which provides that a debtor has committed an act of Bankruptcy:
“If execution against him has been levied by the seizure of his goods under an order of any court or if a return of no goods has been made by the sheriff or county registrar whether by endorsement on the order or otherwise”
The High Court did have a “rule of practice” which stated that a “return of no goods” (nulla bona) was required to be obtained by a creditor before the High Court would grant the creditor leave to issue a bankruptcy summons. However, the Supreme Court held in February 2009 (Gerard Harahill -v- Eugene Cuddy) that there should be no rule of practice which requires a return of no gods in order for a bankruptcy summons to issue.
1. Bankruptcy Summons
This demands payment of the sum due within 14 days in default of which the debtor will have committed an act of Bankruptcy (Section 7 (1) (g))
2. Petition for arrangement
The debtor can Petition the Court for protection from Bankruptcy proceedings so that he can put an offer of composition to his creditors. If the offer is accepted by three-fifths in number and value of his creditors and approved by the Court then it is binding on all his creditors. If the offer is not accepted or not approved by the Court then the Court itself may adjudicate the debtor Bankrupt.
Formal Insolvency Proceedings:
These proceed by way of Petition (which must issue within three months of the commission of the act of Bankruptcy) grounded on Affidavit.
The Petition, Affidavit and all other forms required in Bankruptcy proceedings can be found in appendix O of the Rules of the Superior Courts Statutory Instrument no. 79 of 1989
Either a creditor, or the debtor, may commence bankruptcy proceedings.
The Petition must be served personally on the Debtor. In practice, this can be very difficult if the debtor chooses to be evasive.
If the debtor is adjudicated Bankrupt notice of Adjudication must be published in Iris Oifigiuil.
Only the Court can adjudicate someone Bankrupt
For practical purposes, all steps in a Bankruptcy require Court approval.
When someone is adjudicated Bankrupt their property vests in the Official Assignee in Bankruptcy. The Official Assignee deals, subject to the approval of the Court (Section 61 (7)), with all practical aspects of the day to day running of the Bankruptcy – such as disposing of the Bankrupt’s assets and certifying to the Court who the creditors of the Bankrupt are for the purposes of Irish Bankruptcy Law. The powers, duties and functions of the Official Assignee are set out in part III of the Bankruptcy Act, 1988.
Among other duties, the Bankrupt is required to disclose all property to the court; to deliver up to the Official Assignee all property in his/her custody or control; to deliver up to the Official Assignee all books and papers relating to his/her estate.
Section 123 of the Bankruptcy Act, 1988 sets out 16 separate offences commissable by a Bankrupt all of which fall under the broad heading of failure to co-operate with the Court in the administration of the Bankrupt’s estate.
Creditors of a debtor may be categorised as either Preferential or non-preferential.
The several claims within each of the above categories rank pari passu as between themselves.
Preferential Claims, as a generality, include rates, taxes and social insurance contributions. They are set out in detail in Section 81 et seq. of the Act. It should be noted that the costs of the Bankruptcy rank in priority to all claims pursuant to Section 80 of the Act.
Lodgment and admission of Claims are dealt with in the (lengthy) first schedule to the Bankruptcy Act.
Only Creditors who prove their claims in the Bankruptcy can share in any dividend. The Official Assignee can fix the time within which claims must be submitted. Proof of Debt may be furnished by way of a detailed statement of account, an affidavit of debt or other prescribed means.
The new methods of being discharged are as follows:
1. Every bankruptcy shall, on the 1st Anniversary be discharged (The discharge may be delayed for up to 15 years if the bankrupt has not co-operated etc.) or
2. The Bankrupt has paid all costs and preferential claims and obtained the consent of all creditors.
A. 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.
Other 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 in the Office of the Examiner of the High Court and searches can be made against this register.
A. 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.
A. 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.
The Statement of Affairs must set 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.
A. 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 €6,000 (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.
A. 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.
A. 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.
A. Yes, you can operate a bank account. However if you obtain credit of €650 or more without disclosing your bankruptcy, you are guilty of an offence.
A. 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.
A. 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.
A. Yes, and you can continue in current employment or seek employment.
A. 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.
A. Yes, bankrupt persons are not entitled to hold elected representative office, in local authorities, in the Dáil or the Seanad.
A. 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.
A. 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.
A. 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.
A. Then this is a secured loan against the property and the Official Assignee’s interest only relates to the equity remaining in the property.
A. 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.
A. In a bankruptcy all your assets will be taken by The Official Assignee. If you are presently insolvent, but not yet bankrupt, you may take certain steps to protect “future” assets such as expected inheritances, or pension entitlements.
A. 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.
An undischarged Bankrupt suffers certain statutory disabilities such as being prohibited from being a Company Director or in any way concerned with the management of a company – Companies Act, 2014 ; being prohibited from being a member of the Dail or of a local authority.
On discharge, any property remaining in the hands of the Official Assignee automatically revests in the discharged Bankrupt. A discharged Bankrupt can set up a business in the same way as anybody else.
At a commercial level a discharged Bankrupt may have difficulty getting any kind of credit.
The Government initially published the Personal Insolvency Bill on 25 January 2012, and re-issued an updated version of the Bill on 29 June 2012. The Personal Bankruptcy Act 2012 itself was signed into law by President Higgins on 26th December 2012.
The Personal Insolvency Act 2012 Act provides for the establishment of an Insolvency Service. If you wish to have detailed guidance on the operations of the Insolvency Service of Ireland please go to their web site at www.isi.gov.ie Their web site provides detailed guidance on the various formal options available, together with illustrative examples of cases. We set out below a summary of the options available.
The Personal Insolvency Act 2012, as amended, provides, subject to certain conditions, for a Debt Relief Notice of forgiveness for persons with no assets and no income that are unable to meet qualifying debts totalling not more than €35,000. The purpose is to create an efficient non-judicial means of allowing persons to resolve unmanageable unsecured debt problems. (Similar systems operate in the UK, Northern Ireland and Australia).
With the assistance of an approved intermediary the debtor may apply to the Insolvency Service to certify that the qualifying debts be frozen for one year following which if, the person still cannot pay, the Service will certify that the debt is written off.
General conditions for a DRC
Where a DRC has been granted by the Insolvency Service
The Personal Insolvency Act 2012 provides for a system of Debt Settlement Arrangements (DSA) between a debtor and two or more creditors to repay an amount of unsecured (consumer type) debt over a set period. With the required assistance of a Personal Insolvency Practitioner (“PIP”), the debtor may apply to the Insolvency Service for a Protective Certificate in respect of preparation of a DSA. If granted, the Certificate would provide for a standstill period during which creditors may not take action against the debtor. The Personal Insolvency Practitioner would then put forward a Debt Settlement Agreement to creditors for agreement. If approved, the Insolvency Service would provide formal registration of the Debt Settlement Agreement. At the satisfactory conclusion of the Debt Settlement Agreement all debts covered by it would be discharged. The Insolvency Service has no role in the negotiation and agreement of a Debt Settlement Agreement. (Similar systems operate in the UK, Northern Ireland and Australia).
General conditions for application for a Debt Settlement Agreement:
When a Debt Settlement Agreement has been agreed with creditors
The Personal Insolvency Act 2012 provides for a system of Personal Insolvency Arrangements (PIA) between a debtor and one or more creditors to repay an amount of both secured and unsecured debt over a period of 6 years (with a possible agreed extension to 7 years)
General conditions for application for a Personal Insolvency Arrangement:
A Personal Insolvency Arrangement must be supported by at least [65%] of creditors and at least [50%] of secured creditors and [50%] of unsecured creditors in terms of value
When a Personal Insolvency Arrangement has been agreed with creditors
For a detailed review of the various issues that debtors should consider in contemplating a Personal Insolvency Arrangement please click on the link below:
The amending legislation removing the creditors’ veto in a PIA passed all stages in the Oireachtas, and was signed into law by the President on 28th July 2015 . The new legislation is effective from 20th November 2015.
To say that the amendments are complex is an understatement! The amendments to the Act will only apply to debtors who have a debt which is secured over their family home and in respect of which the debtors, on 1 January 2015, were in arrears with their payments, or the debtors, having been, before 1 January 2015, in arrears with their payments, had entered into an alternative repayment arrangement with the secured creditor concerned. As such, possible removal of the creditors’ veto only applies to a Personal Insolvency Arrangement (“PIA”) and does not apply to Debt Settlement Arrangements.
If a PIA is voted against at the creditors meeting, then the debtor has the right to appeal to the courts to review the creditors’ votes. The appeal would have to be made by the PIP on behalf of the debtor. It is expected that the legal team representing the PIP would require payment up front, and that such a payment would have to be financed by the debtor. No guidelines have yet been given on who will pay the costs of creditors who successfully “win” cases.
Where the debtor has only one creditor, which, by definition, would have to be a creditor secured on the family home, it is possible to appeal a no vote to the courts.
In reality, where a debtor has already entered into an alternative repayment arrangement with his lender, it will be very difficult for a Personal Insolvency Practitioner (“PIP”) to even commence the process of a PIA, as the lender will have probably ensured that the debtor is already solvent within the meaning of the legislation. The definition of solvency is being able to pay debts as they fall due. For example, you might have a debtor whose family home is valued at €200,000 but has a mortgage of €350,000. If the lender is prepared to give a “split” mortgage, and asks the debtor to pay €1,200 a month on €200,000, and “parks” the remaining €150,000, then the debtor might be cash flow solvent, and therefore not eligible for a PIA.
it will now be judges who decide what a sustainable mortgage is, as they will have to abide by the legislation. The key Section of the revised legislation is:
The judges will, in effect, have to decide on issues of interest rates, length of mortgages, amounts of Principal and Interest payments etc. In theory, a judge could decide to agree a PIP’s proposal that reduces the interest rate from, say 5%, to 2%, and extend the term of a loan from, say 20 years, to 25 years. It will be some time before there is a body of case law that can be used to provide guidance.
Where the debtor has more than one creditor, and his PIA is voted down, but some creditors have voted in favour of the PIA, it will be possible to appeal to the courts.
In order for such an appeal to be successful, it must be shown that at least one class of creditors has accepted the PIA proposal, by a majority of over 50% of the value of the debts owed to that class. However, the definition of class for this purpose is not limited to the classes applicable under the legislation (i.e. the existing classes of overall creditors, secured creditors and unsecured creditors) but uses a more flexible “examinership” test. A class may be comprised of any creditors having interests or claims of a similar nature, and a single creditor may be sufficient to constitute a class, though the Court will have regard to the overall number and composition of the creditors and to the proportion of debts due to the class supporting the proposal.
The amendments to the legislation restraining the creditors’ veto will certainly help some people, particularly those people who have mortgages with providers who have thus far refused to engage in the PIA process. However, we believe that in many cases it will be difficult to get loans actually written off on family homes, as we anticipate that many lenders will just simply agree “split” mortgages with debtors and “park” residual debt. Such “split” mortgages do technically restore people to solvency within the meaning of the legislation, even though the debtor may still be ”balance sheet” insolvent. Such people may face a life time of living on Reasonable Living Expenses, with yearly reviews. It remains to be seen if the courts will restrict the amount of debt that may be “parked” on a family home.
As with any new legislation, it will be necessary to see how the courts interpret it to determine if it is workable or not.
The Personal Insolvency Act 2012 provides for a number of amendments to the Bankruptcy Act 1988 to provide for a more enlightened, less punitive and costly approach to bankruptcy. These amendments continue the reform of bankruptcy law begun in the Civil Law (Miscellaneous Provisions) Act 2011.
The main elements of the bankruptcy reforms include the following:
*With regard to the reduced period for automatic discharge from bankruptcy, in addition to any existing technical and other conditions contained in the 1988 Bankruptcy Act, the following new provisions contained in the Scheme of the Bill would also apply:
– in a new section (Automatic discharge from bankruptcy) that the bankrupt shall after discharge from bankruptcy have a duty to cooperate with the Official Assignee in the realisation and distribution of such of his or her property as is vested in the Official Assignee.
– in a new section (Objection to automatic discharge from bankruptcy) that the Official Assignee or a personal insolvency trustee shall have an explicit power to object to the discharge of a person from bankruptcy. The primary grounds for such objection are evidence as to the bankrupt’s lack of cooperation, dishonesty or other wrongful conduct. The court, if satisfied, as to the evidence may suspend the discharge pending further investigation or extend the period before discharge of the bankrupt up to a maximum of 8 years.
(It should be noted that there are no prohibitions contained in the Bankruptcy Act 1988 with regard to restrictions on the nature of employment or profession of a person adjudicated bankrupt. Such prohibitions, where they exist, are contained in sectoral legislation, e.g. in the Electoral Acts in regard to membership of Dáil Eireann or in contracts of employment, e.g. in the legal profession).
The Insolvency Service has published detailed guidelines on their web site, www.isi.gov.ie on what are reasonable living expenses. It is expected that that in any Debt Settlement Arrangement, Personal Insolvency Arrangement or Bankruptcy any income earned above what is required to pay reasonable living expenses will be used to pay creditors.
We provide a full service of assisting clients to formally self-adjudicate themselves bankrupt.
Our service includes the following:
Our fees and expenses for assistance in making an application to the High Court for Bankruptcy for an individual with less than €2 million debt are as follows:
|Provide Opinion under S.52 of the Act||950||218.50||1,168.50|
|PIP report & Opinion for Bankruptcy Petition, Preparation of papers||3,500||805.00||4,305.00|
|Lodgment and Court Attendence||500||115.00||615.00|
|Official Assignee fee||200||–||200.00|
|Advertising in Iris Oifigiuil||75||–||75.00|
[The VAT rate utilised above is 23%.]
Court fees of €210 previously payable in respect of filing for a bankruptcy petition and statements affairs accompanying affidavit in the Examiners Office of the High Court were eliminated as at 31 October 2014, rendering bankruptcy petitions less expensive.
As part of our service one of our experienced staff will attend the High Court with you on the day your petition is heard. There will be no need to instruct solicitors or barristers. Your petition hearing will be one of many heard that morning, and it should only take the judge 3 – 5 minutes to deal with it. Generally speaking, you will not be required to speak. When your name is called you would just be expected to stand up and acknowledge to the judge that you are present.
You are not alone in the difficulties that you face. In many cases we are able to develop a solution that helps you to regain control over your financial difficulties.
We are Ireland’s leading firm for advising individuals facing bankruptcy, and have extensive practical experience of dealing with all aspects of personal insolvency. We have assembled an expert panel of solicitors and Junior/Senior Counsel who are experts in specific areas of personal bankruptcy. We are experts at navigating the complex interfaces of the Bankruptcy Acts, Companies Acts, Taxes Acts, Conveyancing Acts, Codes of Conduct and other key legislation in order to create a solution. We also provide a service of providing a “second opinion” on any existing advice that might have been previously provided.
We are authorised to offer debtors the full range of options available under the Personal Insolvency Act 2012.
We treat all cases with the utmost confidentiality. We charge a fee of €400 (inclusive of VAT) for an initial consultation at which one of our experienced Personal Insolvency Practitioners will outline what options are available to you.
For further information please contact Tom Murray or Ciara Nolan on 01 661 4066. firstname.lastname@example.org email@example.com
(Tom Murray is authorised by the Insolvency Service of Ireland to carry on practice as a personal insolvency practitioner.)