1. What is Bankruptcy?

Bankruptcy is a High Court run Personal Insolvency.

It can be a voluntary procedure where an individual applies to the High Court for their own Bankruptcy. It can also be an involuntary procedure where an individual’s creditors take legal action against them to make them Bankrupt.

Bankruptcy will normally require the sale of your surplus assets plus a contribution from your income after your reasonable living expenses have been paid.

Your Bankruptcy will be administered by the Official Assignee in Bankruptcy (a Government employee).

2. What is the effect of being declared Bankrupt?

This is a serious step – you must be sure that you understand what you are applying for.

Whilst you do not need to take advice before applying we strongly recommend consulting a Personal Insolvency Practitioner (PIP) before doing so. The PIP will advise you about your alternative options and the consequences of Bankruptcy.

You should be aware that a PIP will normally charge for the work they do.

3. How will Bankruptcy deal with my debts?

So long as you fully comply with your duties and obligations all your unsecured debts will be written off.

Unlike a Personal Insolvency Arrangement, which may be able to restructure or write off some of your mortgage debt, your secured creditors are not affected by your Bankruptcy. Secured creditors may still take action to take possession of your home if you fall behind with your mortgage payments.

Any new debt taken on after you are made Bankrupt will not be written off.

4. Will Bankruptcy affect my credit rating and employment?

Bankruptcy will affect your credit rating and can also prevent you from doing some jobs. Before applying for Bankruptcy you should check with your employer whether your job would be affected.

5. How do I apply for Bankruptcy?

You can do this on your own or with the help of a PIP.

You must have over € 20,000 of debt.

This is a High Court process. There are a number of statutory forms which must be filled out which includes a full picture of your financial and personal circumstances (which can be downloaded from www.isi.gov.ie ), together with supporting documentation. In addition you will need a letter from a PIP showing that you have taken advice and Bankruptcy has been recommended.

With these forms you then file your application for Bankruptcy (together with the application fee) with
The Office of the Examiner of the High Court. A date for the High Court hearing will then be set (normally a Tuesday morning) and you must attend this hearing (bringing with you all your financial information etc). Immediately (same day) upon the Judge awarding Bankruptcy you must present yourself at the Bankruptcy Division of the Insolvency Service of Ireland (ISI) and provide them with your documentation and arrange for your Bankruptcy to be notified in the Iris Oifigiuil and on the ISI’s website (to bring the Bankruptcy to the attention of creditors). In addition it is quite likely the Official Assignee (the person who will be administering your Bankruptcy) will wish to interview at some point

The application and notice fee is approximately €270.

Unlike other forms of personal insolvency your creditors do not get to object to your application.

6. Will my family, friends or colleagues/employer find out?

The Official Assignee will only write to your creditors to inform them of your Bankruptcy asking them to submit their claim. There is no newspaper advert and your employer will not be contacted (unless they are a creditor). However, your Bankruptcy will be recorded on the public Register which is only normally scrutinised by financial organisations but it is a public register.

7. How long does Bankruptcy last?

Normally you will be discharged from Bankruptcy after 12 months.

If you have surplus income after paying your reasonable living expenses you will normally be required to pay a monthly contribution for a period of 3 years.

8. Will I lose my home?

Sometimes this happens.

Firstly, as Bankruptcy doesn’t affect your mortgage creditor, if you are not able to afford your mortgage payments the creditor may repossess your home.

If you have equity in your home then the Official Assignee will require this value to be paid into your Bankruptcy. If you cannot raise these funds then it is likely your home will be sold.

If you are a homeowner it may be that Bankruptcy is not the best solution for you and instead a Personal Insolvency Arrangement (PIA) may be more appropriate. It is essential that you take advice from a PIP to discuss this before applying for Bankruptcy.

9. Can I keep my car?

So long as your car is not unreasonably expensive or valuable and you need it for work or family reasons then you will normally be able to keep your car.

10. What will happen to my pension?

When setting what you must pay each month to your Bankruptcy the Official Assignee will normally allow a reasonable monthly payment to your pension fund to continue.

Normally your pension pot will be safeguarded in your Bankruptcy so long as you haven’t made excessive pension contributions in the lead up to entering your arrangement.

However, should you be eligible to take a lump sum or income from your pension during the duration of your arrangement (or previously have been) then the Official Assignee may require part of this to be paid into your Bankruptcy.

11. What will my creditors expect?

As a general rule, creditors will expect you to repay as much as you can reasonably afford.

When the Official Assignee is calculating whether you should be paying a monthly contribution from your income you will be allowed to maintain a reasonable standard of living which takes into account your individual circumstances.

12. What happens if my circumstances change during my Bankruptcy?

The Official Assignee will reassess your contribution when your circumstances change, for example if you are made redundant or a child is born. If your income goes up, you will be required to pay a higher contribution. If your income goes down, your contribution will be reduced or even completely suspended.

If you acquire new assets during your Bankruptcy, such as an inheritance, lottery win or significant gift you must inform the Official Assignee who will likely require it to be paid into your Bankruptcy.

13. What happens to my debts?

When you are discharged (normally after 12 months) you will be discharged from all the unsecured debts you had when your bankruptcy was awarded.

Your secured debts are not written off.

14. What happens if I don’t co-operate with the Official Assignee?

Where you fail to co-operate with the Official Assignee, the High Court may summon you to examine you under oath. Failure to co-operate with the Official Assignee may also result in conviction for offences under the legislation, which may make you liable to a fine and / or imprisonment for a term up to 5 years. Your bankruptcy could also be extended up to 15 years.

15. Do I get any of my assets back when I am discharged from my Bankruptcy?

Normally no.

16. Can I be the director of a limited company?

Not during your Bankruptcy.

17. Will this affect my job?

Usually not but there may be certain specific jobs where either your employer or specific legislation will not allow you to enter Bankruptcy. It is important you check your contract of employment or speak to your employer before deciding to go ahead.

18. Can I hold public office?

Some public bodies have rules stopping anyone who has entered Bankruptcy from holding office. It is important you check this before deciding to go ahead with an arrangement.

19. Will my credit rating be affected?

Yes. The credit reference agencies will record details of your Bankruptcy on your credit file.

20. Who can I contact for advice?

If you are struggling with debt, you should seek advice as soon as possible form a suitably qualified person such as a personal insolvency practitioner (PIP) or your local Money Advice & Budgeting Service (MABS).

Further sources of information:

Insolvency Service of Ireland – www.isi.gov.ie

Money Advice & Budgeting Service (MABS) – www.mabs.ie

Insolvency Help is a trading style of 180 Advisory Solutions Ltd

Barry Stewart is authorised by the Insolvency Service of Ireland to carry on practice as a personal insolvency practitioner(authorisation number PB00282). Barry Stewart is also authorised to act as an insolvency practitioner in the UK by the Institute of Chartered Accountants Scotland.