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Frank Flanagan, Senior Associate at Mason Hayes & Curran, examines the Bankruptcy (Amendment) Act 2015, which makes several changes to the rules on bankruptcy in Ireland including reducing the bankruptcy term to one year, bringing them in line with that of the UK.
The Bankruptcy (Amendment) Act 2015 (the 2015 Act) amends the Bankruptcy Act 1988 (as amended) (the 1988 Act) to:
Default term of bankruptcy
The default term of bankruptcy is now one year, which is in line with the term in England and Wales, and Northern Ireland.
Where a bankrupt has:
the court may, where it considers it just, on the application of the Official Assignee (or a creditors’ trustee where appointed), make an order substituting a date, up to eight years from the date of adjudication for the date on which the bankruptcy would have expired.
In more serious cases, this term may be extended to 15 years where the court considers it just to do so.
Term of bankruptcy payment orders
Bankruptcy payment orders now have a default term of three years, although this can be increased to five years.
Recognition of civil partnerships and cohabitants
The 1988 Act has been amended so that a court order is required before the Official Assignee can sell:
Re-vesting of family homes/shared homes/principal private residences
The default position is that, unless the Official Assignee applies to court within three years of the date of adjudication, the bankrupt’s interest in family homes, shared homes and principal private residences will re-vest in the bankrupt on the third anniversary of the date of adjudication without the need for any conveyance, assignment, or transfer.
This re-vested estate or interest remains subject to any mortgage.
There has been a concerted campaign to reduce the term of bankruptcy by insolvency practitioners, non-governmental organisations, and politicians. In July 2015, a parliamentary committee, having considered over 100 submissions, recommended reducing the term to one year.
Willie Penrose, a member of the Irish Parliament, had previously introduced a private member’s bill to do just this. Mr Penrose is a member of the Labour party, the smaller party in the coalition that formed the government, until Parliament was dissolved on 3 February 2016. The Labour party has long campaigned for a reduction in the bankruptcy period and there are media reports that suggest that the timing may be related to wooing voters.
While the possible extension of the term of bankruptcy for those who hide assets, or do not co-operate, to up to 15 years was not widely predicted, the Official Assignee had raised concerns that a one-year bankruptcy period might result in inbound bankruptcy tourism into Ireland and the Official Assignee is currently dealing with a small number of very public bankruptcies where it appears that assets may have been concealed, or attempts have been made to put them beyond his reach.
Most of the provisions of the 2015 Act (excluding those that require new rules of court) commenced on 29 January 2016.
Existing bankruptcies due to expire within six months of the commencement date are not affected.
Existing bankruptcies due to expire more than six months of the commencement date, will expire on the later of:
Transitional provisions are also provided for bankruptcy payment orders that would have expired more than six months after the commencement date expiring on that date.
The 2015 Act has been broadly welcomed but the public response from the insolvency profession has been somewhat muted.
No, the Personal Insolvency (Amendment) Act 2015, made amendments to those procedures earlier in the year.
Bankruptcy tourism, which, in recent times, has increased in popularity among Irish citizens seeking to avail of the more attractive regime in other countries, should largely become a thing of the past.
In this regard, the 2015 Act is balanced in its approach—it assists co-operative debtors while also providing sanctions with significantly extended terms where debtors seek to abuse the process.
Consequently, future attempts by Irish citizens to declare bankruptcy in other jurisdictions may in certain cases be cause for suspicion amongst creditors.
There have been suggestions that Ireland could become a destination for bankruptcy tourism. However, there appears to be little reason to believe that the regime in Ireland is now more attractive than that in England and Wales.
Interviewed by Susan Ghaiwal.
The views of our Legal Analysis interviewees are not necessarily those of the proprietor.
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