Bankruptcy Law in the Republic of Ireland

The essence of bankruptcy is that the debtor's assets are transferred to an official who administers and realises them for the benefit of all creditors.

The classic definition of bankruptcy is that: "it is a law for the benefit and relief of creditors and their debtors, in cases in which the latter are unable or unwilling to pay their debts.

"[5] Irish bankruptcy law has been the subject of significant recent comment, from both government sources and the media, as being in need of reform.

Part 7 of the Civil Law (Miscellaneous Provisions) Act 2011[6] has started this process and the government has committed to further reform.

:[10] When a debtor is adjudicated bankrupt, the most notable effects on his personal situation are as follows: The bankrupt commits a criminal offence if he does not disclose all his property to the Court or conceals any part of his estate or if he obtains by false representation any property or credit.

Pursuant to S45 of the Bankruptcy Act (as amended), a bankrupt is permitted to retain as excepted articles: clothing, furniture, bedding, tools or equipment of his trade or occupation or necessary items for himself, his/her spouse or civil partner, children and dependent relatives residing with him/her, as he may select, not exceeding in value €3,100 or such further amount as the court on an application by the bankrupt may allow.

On adjudication of bankruptcy, creditors may not take action against the bankrupt's person or property without Court consent.

[1]: 110 Before a debtor may bring bankruptcy proceedings against himself, he must show that he is unable to pay his debts to his creditors and that his available estate is sufficient to produce at least €1,900.00.

The most high profile debtor's petition in recent times was that of Seán FitzPatrick,[30] former chairman of Anglo Irish Bank in July 2010.

The bankrupt is obliged (pursuant to section 19 of the Bankruptcy Act 1998) to: The functions of the OA are to get in and realise the property, to ascertain the debts and liabilities and to distribute the assets.

The court has a discretion to postpone a sale under this section "having regard to the interests of the creditors and of the spouse and dependents of the bankrupt as well as the circumstances of the case".

Accordingly, the OA may obtain an order for sale subject to distributing a share of the proceeds to the spouse of the bankrupt.

In a significant judgment on 10 January 2012 the High Court in Belfast held that Sean Quinn who had interests on both sides of the border did not have his COMI in Northern Ireland.

[44] The first applies in any case where in the opinion of the court, the debtor ought not to have been adjudicated bankrupt[45]i.e. where the order was made without jurisdiction or where there had been a clear abuse of process; where the mechanisms of the Bankruptcy Act had been improperly used.

The effect of an order is to put the bankrupt in the position he was in prior to adjudication insofar as that is possible without causing prejudice to the creditors.

[56] The most prominent cases of alleged bankruptcy tourism are perhaps those of David Drumm former chief executive of Anglo Irish Bank[57] and property developer John Fleming.

Fleming,[58] who had personally guaranteed much of the €1 billion debt of Tivway and associated companies in Ireland, was discharged from bankruptcy in the UK on 10 November 2011, the anniversary of the date on which he was declared bankrupt there.

[61] The high level of Irish debt being written off in the UK has prompted the government there to seek to have EU law amended to make it harder for Irish residents to move to the UK and take advantage of more lenient bankruptcy laws there[3] where bankruptcy lasts for a period of twelve months as opposed to twelve years in the Bankruptcy in Ireland.

[64] The government committed to reform personal insolvency law in a memorandum of understanding with the EU and the International Monetary Fund.

[66] Part 7 of the Civil Law (Miscellaneous Provisions) Act 2011[6] while not going as far as proposed in the Law Reform Commission Report,[67] has made substantial amendments to the Bankruptcy Act 1988 including: On 24 January 2012 the Department of Justice and Equality published the Draft General Scheme of a new personal insolvency bill.

[69] The proposed bill would, among other things, reduce the period of bankruptcy to 3 years and introduce three different non-judicial mechanisms to deal with debt.