Bankruptcy/Personal Insolvency

Bankruptcy/Personal Insolvency

Bankruptcy
Bankruptcy is a court personal insolvency process. The individual becomes bankrupt on foot of a petition to Court which the individual can bring themselves (self-adjudicate) or otherwise a creditor can bring the petition. During bankruptcy, the bankrupt is supervised by the Court and a State Official called the Official Assignee.

At its simplest, the Official Assignee’s role is to:

• Realise the assets of the Company
• Distribute funds to creditors in strict legal preference

Unlike the other forms of personal insolvency that became available under the Personal Insolvency Bill 2012, no protection is given to the family home in bankruptcy and there are very significant personal financial restrictions placed on an individual who becomes bankrupt. Any individual who seeks to self-adjudicate must have made some attempt to show that they attempted to reach a settlement with their creditors away from the bankruptcy process and they must also furnish the Court with a letter from a licenced Personal Insolvency Practitioner confirming why bankruptcy is the most appropriate course of action.

The Bankrupt is automatically discharged from bankruptcy after a one year period however the Official Assignee can seek an extension of the period if unhappy with the conduct of the bankrupt. Furthermore the Official Assignee can seek a payments order against the bankrupt so part of the bankrupt’s income is still made available to creditors for a three year period. Such extensions and orders are however exceptions to the normal practice.

Debt Settlement Arrangement (DSA)
A Debt Settlement arrangement is a voluntary personal insolvency process in which an individual who meets the applicable can seek relief from their debt while under the supervision of a Personal Insolvency Practitioner (PIP). This process can be used by a debtor to compromise with his creditors subject to 65% of creditors approving the compromise put forward.

The debtor firstly engages with the PIP to determine suitability and thereafter, the PIP can seek a protective certificate for the debtor to enable a compromise with creditors to be formulated and put to creditors. The process is similar in concept to corporate examination and the main facets of a debt settlement arrangement are as follows:

• 70 day protection period to formulate the compromise
• No minimum period Max 5 year period but option to increase to 6
• Yearly status updates needed from PIP
• Creditors meet and vote to approve scheme
• Only unsecured debt included
• Pensions protected to a point
• Certain liabilities are excluded from the process
• Certain other liabilities are excluded from the process unless the creditor agrees to inclusion

Personal Insolvency Arrangement (PIA)
A personal insolvency arrangement is similar to a debt settlement arrangement in concept and processes. It is a voluntary personal insolvency process in which an individual who meets the applicable criteria can seek relief from their debt while under the supervision of a Personal Insolvency Practitioner (PIP). This process can be used by a debtor to compromise with his creditors subject to three voting classes approving the compromise put forward (65% of overall creditors, 50% of secured creditors and 50% of unsecured creditors).

As with a DSA, the debtor firstly engages with the PIP to determine suitability and thereafter, the PIP can seek a protective certificate for the debtor to enable a compromise with creditors to be formulated and put to creditors. The main facets of a PIA are as follows:

• 70 day protection period to formulate the compromise
• No minimum period Max 6 year period but option to increase to 7
• Yearly status updates needed from PIP
• Creditors meet and vote to approve scheme
• Secured debt included but limited to €3m unless written consent obtained from all secured creditors.
• Pensions protected to a point
• Certain liabilities are excluded from the process
• Certain other liabilities are excluded from the process unless the creditor agrees to inclusion

Debt Relief Notice
A Debt Relief Notice is a voluntary personal insolvency process in which an individual who meets the criteria below can seek relief from their debt while under the supervision of the Insolvency Service of Ireland and an approved Intermediary.

• €60 or less net income per week
• €35,000 or less debt
• Exit at earlier of payment of 50% of debts or three years after entering process
• Debtor entitled to a reasonable standard of living (details available on the ISI website www.isi.gov.ie)
• Pensions protected to a point
• Only one such relief notice can be obtained in lifetime