Defending Bankruptcy Charges

How Can a Creditor Make you Bankrupt?

Creditors can request that the High Court make a debtor bankrupt in the form of a document called a petition, a sworn document that sets out the nature of the debtor’s debts.

The creditors then promise to attend the court hearing, advertise the court sitting and pay any fees or expenses of the Official Assignee.

When the petition is filed, the petitioning creditor advertises notice of the debtor’s bankruptcy in the Iris Oifigiúil and a national daily newspaper or the ISI website.

The petitioner must lodge €200 towards the costs and outlays of the bankruptcy with the Bankruptcy Division of the ISI and take responsibility of any further costs and outlays which may be incurred.

Why Would a Creditor Petition to Make You Bankrupt?

Creditors may petition for bankruptcy against a debtor when it’s understood that the debtor has committed an act of bankruptcy within the previous three months.

Examples of these “acts of bankruptcy” can include:

• Failure to comply with a bankruptcy summons requesting payment of a specific sum due, within fourteen days of summoning
• Making of a return of no goods in respect of the debtor by the sheriff or county registrar when he has been unable to find any goods to seize
• Where a debtor has been subject to a Debt Settlement Arrangement which has been terminated or which is deemed to have failed
• Where the debtor has been subject to a Personal Insolvency Arrangement, which has been terminated, or which has failed

The above may also link with other motivations that can lead to creditors wanting to petition for a debtor to become bankrupt.

These may include:

• They know you have land or property which could be sold to pay back your debts
• They believe you’ve been fraudulent or broken promises to try to stop you from getting more credit in the future
• They believe you’re being dishonest or hiding things of value
• They want your financial affairs to be investigated
• They’re part of a group of employees who want to recover wages they’re owed

Requirements for Bankruptcy Petitions

However, before a creditor can petition for your bankruptcy, there are conditions that they need to meet. For example:

• The debt owed by the debtor must be at least €20,000
• The petition must be presented within three months of the “act of bankruptcy” determined
• The amount of debt owed must be set out in an affidavit (this is a written, signed and sworn statement which allows a person to formally affirm something to be true before a person that is authorised to witness them such as a practicing solicitor, Commissioner for Oaths or an officer of the Court)

Furthermore, the debtor whom the creditor wishes to make bankrupt:

• Must be an Irish resident or have been living in Ireland for three years prior to the presentation of the petition
• Must have ordinarily resided, had a dwelling house or place of business, or carried on business within the State.

Lastly, the creditor’s petition must state whether they hold any security (for example, a mortgage or a charge) in respect of the debt. If so, they must indicate whether they intend to give up the security for the benefit of other creditors or put a value on their security.