Bankruptcy is one of four debt solutions available to people who find themselves in the position where they are unable to pay their debts, as the debts fall due. And do not see themselves being able to do so, in the next few years.
How to know if Bankruptcy is the right debt solution?
Bankruptcy is a formal, High Court process for people in debt over €20,000. Before you consider applying for bankruptcy you must first have explored the alternative solutions to bankruptcy which are contained in the Personal Insolvency Act 2012. A personal Insolvency Practitioner can help you identify if bankruptcy is the correct option for you.
What are the main consequences?
The ownership of an insolvent person’s property transfers to the Official Assignee in Bankruptcy to be sold by him for the benefit of those to whom the individual owes money, his/her creditors. When the person’s property is sold the Official Assignee will make sure that the proceeds are shared out fairly among creditors and any outstanding debt will be written off.
Where a debt is written off it means that the balance due and owing is no longer being pursued. Where a debt is written down it means that the total debt due and owing has been reduced by agreement.
Bankruptcy will normally last for one year after which you will be discharged. The term can be extended if you do not fully cooperate or fail to disclose all necessary details. After discharge from bankruptcy, all your assets that existed at the time of your bankruptcy continue to be owned by the Official Assignee until sold.
In bankruptcy, your interest or share in the family home will transfer to the Official Assignee. While it is a possibility, you should not assume you will lose your family home. You may be able to agree on a schedule of mortgage payments with your bank and Official Assignee. These payments would have to be factored into the calculation of your Reasonable Living Expenses as approved by the Official Assignee.
If your home is in negative equity (the value of the home is less than the outstanding mortgage) there is no immediate reason for the Official Assignee to seek to sell. If the home is in positive equity (the value of the home exceeds the amount of the outstanding mortgage) the Official Assignee will first seek to sell what has become his share in the family home to your spouse or civil partner. The Official Assignee cannot sell the family home without first seeking and obtaining permission from the High Court. If the Official Assignee has decided not to sell your home within 3 years of your bankruptcy adjudication, ownership may automatically transfer back to you, unless agreed otherwise.
You are entitled to keep a vehicle of a reasonable value if it is a necessity. In bankruptcy, all of your assets are transferred to the Official Assignee with the exception of essential assets up to a value of €6,000
You can usually continue in your current employment or seek a new job while you are bankrupt. There are some professions that do not allow employees to continue in their employment once bankrupt so it is advisable to make enquiries to your professional/regulatory body in this regard.
You are still entitled to earn an income but the Official Assignee may request a contribution from your income for the benefit of your creditors. Such income payment orders last up to 3 years and are usually put in place once your bankruptcy begins.
Your bankruptcy could have consequences for your spouse or civil partner but it will depend on your particular circumstances. The Official Assignee takes over as landlord of any rented property you own and there is no break in the lease agreement for the tenant. If you are in business and stop trading due to bankruptcy your employees are entitled to claim statutory redundancy from the Department of Social Protection.
If your circumstances change during your period of bankruptcy you must tell the Official Assignee and the terms of your income payment order may be altered.
At Gibson & Associates, we have a dedicated experienced and empathetic team headed up by one of our Partners, Amanda Walsh, who ensures we tailor the service and advice we provide to clients seeking debt and insolvency advice to their specific needs. Amanda and her team have represented clients through bankruptcy and other insolvency solutions since the Personal Insolvency Act 2012 came into operation. We have acted for a variety of clients to include business people, married couples and individuals and helped them through one of the most difficult periods in their lives to the point where they resumed stress free lives again having lived for years with the burden of debt which affected both them and their loved ones.
Most recently, our team secured the first ever Circuit Court decision ( currently under appeal) which provided for a court approved debt for equity swap in respect of a client’s family home mortgage which will keep him in his home.
This article has been produced by Amanda Walsh, Gibson & Associates Solicitors and is intended as a general, introductory guide for insolvent debtors in relation to the availability of, and the process involved in seeking bankruptcy and is not providing legal advice. In addition, the Gibson & Associates Solicitors has no role in providing financial advice.