Developments in Bankruptcy Law: Solving Personal Insolvency in Ireland

Author:Mr Neil O'Mahony
Profession:Eversheds O'Donnell Sweeney
 
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On 30 August 2010, the Government approved the publication of the Civil Law (Miscellaneous Provisions) Bill 2010 (the "Bill"). Amongst other amendments, the Bill provides for changes to the law relating to bankruptcy in Ireland. Part 7 of the Bill proposes to amend the Bankruptcy Act 1988 ("BA 1988") by reducing the period of time before which a bankrupt can apply to court to be discharged from bankruptcy from 12 years to 6 years (subject to existing conditions in the law also being met). The Bill also provides for the automatic discharge of bankruptcies existing for 20 or more years.

If enacted, these amendments would represent what is arguably the most significant change to the area of personal insolvency law in Ireland in the last twenty years. In a country where fewer than 50 people were declared bankrupt between 2005 and 2009, it is clear that something in the judicial process is not working. The legislation, in its correct form, has discouraged debtors and creditors alike from using the bankruptcy system in place.

This briefing examines the current legal position both in Ireland and in other jurisdictions in relation to personal insolvency, the problems which have arisen in this area and the potential solutions to these problems.

  1. Current Law

    It must be remembered that the key objective of bankruptcy law is to ensure that the assets of a debtor can be realised and distributed amongst his creditors in a fair and equitable manner whilst also providing some form of protection for the debtor's future income and his ability to make a living after being discharged from bankruptcy.

    At present, the law of bankruptcy in Ireland is predominantly a creature of statute and is governed by the BA 1988 and Order 76 of the Rules of the Superior Court.

    The BA 1988 overwhelmingly favours the rights of a creditor over the rights of the debtor and as a result, the consequences of being adjudicated bankrupt are extremely onerous. Some notable effects of being adjudicated bankrupt are that:-

    all the debtor's assets and property automatically vest in the Official Assignee; the bankrupt must disclose any property acquired after being adjudicated bankrupt and this vests in the Official Assignee; it is an offence for the bankrupt to act as an officer of any Irish company or even of any foreign company which has an established place of business in Ireland and to also take part or be concerned in the management of such a company without leave of the court; the bankrupt...

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