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Bankruptcy Reforms

August 16, 2011

The period within which a bankrupt mayapply to the court for discharge from bankruptcy has been reduced from12 years to 5 years.

The amendment is contained in the Civil Law (MiscellaneousProvisions) Act 2011, which was signed into law on 2 August 2011. Thenew law amends the Bankruptcy Act 1988 and also provides for theautomatic discharge of bankrupts on the 12th anniversary of theadjudication order. A number of technical amendments relating to costsand certain administrative matters are made to improve the operation ofthe Official Assignee in Bankruptcy. Despite the Law Reform Commission’scall for significant review and amendments to current bankruptcy law,the new legislation does not, in fact, constitute anything other thantinkering at the edges of the existing code.

Specific amendments included are as follows:

  • A creditor shall now be entitled to present a petition against a debtor if the debtor has ordinarily resided or had a dwelling-house or place of business in the State within 3 years before the date of presentation of the petition as opposed to 1 year
  • The relevant period for the deeming void of a fraudulent preference by the debtor has been extended to 1 year from the date of the adjudication order rather than six months
  • Sales of property by the debtor at an undervalue within 1 year of the bankruptcy may now be avoided. The relevant period was previously 3 months
  • Discharge from bankruptcy  is amended by the substitution of a new text which now provides for:
    • The automatic discharge of bankruptcies on the 12th anniversary of the adjudication order, and
    • A reduction of the period (from 12 years to 5 years) within which a bankrupt may apply to the court for discharge from bankruptcy where the estate has, in the opinion of the Court, been fully realised

The same conditions that currently attach would continue to attach tothe new 5 year period. In this context, should bankrupt persons be ableto pay the expenses of the Official Assignee, costs of the PetitioningCreditor and preferential payments (if any) owed, they could bedischarged from bankruptcy and freed from all other bankruptcy debts andfrom all the restrictions that apply to bankrupt persons.

Contributed by Barry Cahir