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Proposed changes to Bankruptcy Law
03 September 2010
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By Padraic Ryan
People declared bankrupt will have to wait only six years rather than the current 12 under new legislation proposed by Minister for Justice Dermot Ahern.
The Civil Law (Miscellaneous Provisions) Bill 2010 changes the minimum period of time after which a bankrupt may apply to have the bankruptcy discharged from 12 years to six. It also makes provision for automatic discharge of bankruptcies after 20 years.
The same criteria apply for the six-year period apply as currently do for the twelve-year period – the bankrupt must be able to pay the expenses of the Official Assignee, the costs of the petitioning creditor and any other preferential payments owed. The assets of the bankrupt must also be totally realised.
Responding to questions from Insolvencyjournal.ie, a department of justice official said the change, “was recommended by the Law Reform Commission in its Interim Report on Personal Debt Management and Debt Enforcement of May 2010. The LRC recommended this move as a modest stepping stone towards more comprehensive reform of bankruptcy.”
Speaking at the launch of the LRC’s report in May Mr Ahern said that a comprehensive overhaul of the bankruptcy legislation was required but that a reduction in the appeal period would come before this happened.
The department official stressed that the same obligations for discharge apply for the six-year period as applied for 12. He also said that the changes will apply to any bankrupt, not just those who become bankrupt after the legislation is enacted.
The change has received a cautious response from Michael Culloty of the Money Advice and Budgeting Service (MABS), who said it is an interim measure and should be viewed as such.
“The processes are the same, the costs are still the same and the time period is still long by international comparison,” he said. “We still wouldn’t be recommending it [bankruptcy] as an option for the people we’re dealing with, 70 per cent of who are on social welfare.”
Mr Culloty said that MABS awaits the report of the Government’s expert group on mortgage arrears and personal debt, which published its interim report in July and is due to publish a further report later this month, which it hopes will deal with issues such as debt forgiveness.
The changes will be relevant to more and more people as Ireland’s financial difficulties continue. The number of bankruptcies in Ireland is, unsurprisingly, on the increase. There have been 17 bankruptcies so far this year, including high-profile case such as former Anglo Irish Bank Chief Executive Sean FitzPatrick. This is same number as the total figure for 2009, which was itself a sharp increase from the 2008 figure of just eight bankruptcies.
Even with the proposed change the minimum period of bankruptcy in Ireland is still significantly longer than in many other jurisdictions. In the UK, for example, the majority of bankruptcies are discharged within 12 months. In the United States, the period of discharge varies from about four moths to four years, depending on the kind of bankruptcy filed for, but the idea of bankruptcy is considered a more normal part of business life than it is in Ireland.
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