ONE YEAR BANKRUPTCY IS HERE
One year bankruptcy is now a reality in Ireland after the Bankruptcy (Amendment) Act 2015 was brought into law just before the Dáil broke up for the election.
The commencement order by Minister for Justice Frances Fitzgerald reduces the normal duration of bankruptcy from three years to one and creates a realistic option for people struggling with insurmountable debt to finally be rid of the phone call, letters and stress.
Under the new legislation, the time people who are bankrupt have to make income payments towards their debts has also been reduced from five years to three.
After that, a New Beginning awaits.
Bankruptcy involves writing off of all debts.
All your assets and liabilities are transferred to the High Court’s appointed official (the Official Assignee).
He will try to sell your assets to satisfy your debts which become his responsibility not yours from that point onwards.
Bankruptcy does not mean that you are left with nothing as any bankrupt party is entitled to keep what are called Reasonable Living Expenses, which are often greater than what those struggling to pay debts have been forced to live on for years.
You continue to be able to earn a living and keep certain essential for living and working.
An allowance is also made for a reasonable rent or mortgage repayment which can mean that the family home does not have to be lost if payments on the mortgage can continue.
Under the new legislation, a normal bankruptcy will last for one year with a requirement to pay any additional earnings (above and beyond reasonable living expenses) to satisfy debts for a further two years.
A fundamental shift in attitudes
The Minister described the Act as “a significant reform” which she said reflected “a fundamental shift in attitudes towards indebtedness”.
“Our legislation no longer punishes people who, in most cases, through no fault of their own find themselves with intractable debt.”
The Act also envisaged the abolition of a second court sitting which persons declared bankrupt must attend. This however remains to be implemented, as, according to the Insolvency Service of Ireland (ISI), it requires amendments to court rules to be finalised, a step expected to occur shortly.
The Minister claimed that the new Act will remove unnecessary costs and delays for debtors and creditors, free up court time and resources, and allow more efficient and effective bankruptcy administration.
Family Home Implications
The Act, which has been welcomed by the ISI, also provides for the re-vesting of the family home back to the person who declared bankrupt if the Official Assignee cannot sell it within three years.
“The [new legislation] means that there has never been a better time to take the first step to solvency and a fresh start,” said Lorcan O’Connor, Director of the ISI.
Meanwhile, David Hall, CEO of the Irish Mortgage Holders Organisation described the change as “revolutionary” for those struggling to deal with unsustainable debts and unreasonable creditors.
“For the first time debtors have a mechanism to free themselves from creditors quickly and start anew,” he added.