Bankruptcy term reduced

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Created: Friday, March 04 2016 13:46

The Term of Bankruptcy has been reduced from 3 Years to 1 Year. The Bankruptcy (Amendment) Act 2015 was signed into law on Christmas Day 2015.

The purpose of the act is to reduce the general duration and impact of bankruptcy and in certain circumstances, provide for the re-vesting in the bankrupt person of their interest in their home, with a view to assisting an earlier return to solvency and to normal economic activity.

The Act allows for an extended duration of bankruptcy where a bankrupt person does not cooperate with the bankruptcy process, or seeks to conceal income or assets.

Other changes seek to streamline and modernise key existing bankruptcy procedures, and strengthen or clarify the powers of the Official Assignee.

Before making an application for bankruptcy, debtors are required to explore the alternative solutions as contained in the Personal Insolvency Act, 2012 such as a Debt Relief Notice, Debt Settlement Arrangement or Personal Insolvency Arrangement.

In addition to certain procedural amendments, the key amendments are summarised as follows:

• The most noteworthy amendment is the reduction of the term of bankruptcy from 3 years to 1 year, which is now identical to the term of bankruptcy in the UK (where the bankrupt has co-operated fully in the process).
• A reduction in the maximum period of income payments from a bankrupt to creditors from 5 years to 3 years.
• An extended bankruptcy term (up to 15 years in serious cases), where the bankrupt has not co-operated or given full disclosure.
• The home of a bankrupt will re-vest in the bankrupt (subject to any mortgage) after 3 years if it has not been sold as part of the bankruptcy process.

The Act represents the conclusion of a process of modernisation of the State’s hitherto antiquated bankruptcy laws, that has been ongoing since the financial crisis began in 2008.

Ireland’s bankruptcy laws are now amongst the most enlightened in Europe, which will come as welcome (if belated) news to individuals who are still burdened with substantial historical bank debt.