The need for reform of the laws governing bankruptcy in this jurisdiction has been evident for a number of years. It is widely accepted that the draconian provisions of our current legislation, the Bankruptcy Act 1988, do not properly address the needs of any of the parties involved in the bankruptcy process, whether it be the needs of the individual debtor, the creditors, or the Official Assignee charged with managing the bankrupt’s estate.
In December 2010, the Law Reform Commission published a report on Personal Debt Management and Debt Enforcement which contained over 200 recommendations for reform, in addition to a draft Personal Insolvency Bill. In particular, the Commission recommended the establishment of a Debt Enforcement Office to comprise of a panel of Personal Insolvency Trustees tasked with managing new non-judicial Debt Settlement Arrangements and Debt Relief Orders.
The reform process begun in 2011 when the 1988 Act was amended by the Civil Law (Miscellaneous Provisions) Act 2011. The 2011 Act provided for:
- The introduction of an automatic discharge from bankruptcy on the 12th anniversary of the adjudication order
- The reduction in certain circumstances of the bankruptcy discharge period from 12 years to 5 years. To qualify for this reduced period, the bankrupt must prove to the court that he is able to pay the expenses, fees and costs of the bankruptcy and the preferential creditors in full. The bankrupt must also satisfy the court that (i) his estate has been fully realised; (ii) all after-acquired property has been disclosed; and (iii) it is reasonable and proper to grant the application. Where the court agrees to discharge the bankrupt, he will be freed from all other bankruptcy debts and from the restrictions which apply to bankrupt persons (including the restriction on acting as a company director and being elected to parliament). The bankrupt will also be relieved from the obligation to disclose the fact of bankruptcy before obtaining credit
- The extension of the time periods for reviewing pre-bankruptcy transactions from 6 months to 1 year in the case of fraudulent preferences and from 3 months to 1 year in the case of dispositions of property at an undervalue
- The extension of the jurisdictional threshold to be met by the creditor presenting the bankruptcy petition. Under the 1988 Act, before the Irish courts could assume jurisdiction, the creditor presenting the bankruptcy petition had to show that the debtor was domiciled in the State, or within 1 year before the date of the petition had ordinarily resided or had a dwelling-house or place of business in the State. This residence requirement has now been extended to 3 years. (Whether the bankruptcy proceedings are main or secondary proceedings will still depend on the location of the centre of main interests, as that term is used in the EU Insolvency Regulation)
Under the EU-IMF financial package the Government committed to publishing a Personal Insolvency Bill by the end of April 2012. Heads of the Personal Insolvency Bill were published on 25 January 2012 and a full Bill is due to be published by the end of April. It is expected that the Bill will become law later this year, marking a significant reform of our personal insolvency regime. Please click here to view our article on the Heads of the Bill.
Contributed by Delia McMahon.