Informal Schemes of Arrangement for Individuals
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:
- 1.The Debtor enters into an honest and open dialogue about his current financial circumstances with his creditors.
- 2.The Debtor is pro-active with his creditors, and does not wait for them to initiate legal action.
- 3.The Debtor appoints an independent firm of accountants to prepare and agree the Informal Scheme of Arrangement with his creditors.
Arrangements under Control of Court
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 However, all such formal arrangements were repealed by the Personal Bankruptcy Act 2012, and were replaced by three new arrangements, which are outlined below.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
Bankruptcy Questions and Answers:
1. Who can request the opening of Bankruptcy proceedings?
Either a creditor, or the debtor, may commence bankruptcy proceedings.
2. What are the conditions to be discharged from bankruptcy?
The new methods of being discharged are as follows:
a) 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
b) The Bankrupt has paid all costs and preferential claims and obtained the consent of all creditors.
3. Is my bankruptcy public knowledge?
No. However it needs to be published in the Irish language magazine Iris Oifigiuil.
4.Can I stop the bankruptcy?
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.
5. What am I required to do when I am made bankrupt?
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.
6. What happens to my property when I am made bankrupt?
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. The only property that does not vest in the Official Assignee is essentials up to a value of 6,000 Euro (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.
7. What about property I own abroad?
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.
8. Does it have implications for my salary and pension
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.
9. Can I operate a bank account while I am a bankrupt?
Yes, you can operate a bank account. However if you obtain credit of 650 Euro or more without disclosing your bankruptcy, you are guilty of an offence.
10. Can I still trade while I am a bankrupt?
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.
11. Can I manage a company or become a director of a company?
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.
12. Can I seek employment whilst a bankrupt?
Yes, and you can continue in current employment or seek employment.
13.Can I travel abroad?
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.
14. Are there other consequences?
Yes, bankrupt persons are not entitled to hold elected representative office, in local authorities, in the Dail or the Seanad.
15. Are there alternatives to being made a bankrupt?
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.
16. I have been discharged from bankruptcy; will my name be removed from the Register?
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.
17. Can the family home be sold?
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.
18. What if we have a mortgage against the property?
Then this is a secured loan against the property and the Official Assignee's interest only relates to the equity remaining in the property.
19. I own the family home with the bankrupt; what about my interest?
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.
20. Is it possible to "ring fence" my assets from creditors?
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.
21. What about my income?
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.
Disadvantages of being made bankrupt 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.