EXPLAINER: Bankruptcy - What of it? by Lynch Solicitors Ltd
Being declared bankrupt can seem a very daunting process. There is often uncertainty around how the system works and what you are and are not allowed to do.
In this article, we ask "What is Bankruptcy" and answer some of the most common questions. But the process can be pretty straightforward.
Essentially, if you cannot meet your debts when they fall due, you may apply for Bankruptcy.
This means that all your liabilities and assets become the responsibility of the Bankruptcy Court via a Court officer, known as the Assignee in Bankruptcy.
Can I continue to earn?
You can continue to work and earn during Bankruptcy. You can retain a sum of money which is termed a reasonable living
For three years, any figure earned over this reasonable living expense is payable to the Assignee in Bankruptcy.
You can calculate this reasonable living expense in advance by using a formula available on the Insolvency Service of Ireland website – www.isi.gov.ie.
Can I still keep my Bank Account?
All bank accounts are usually closed by the Banks on Bankruptcy.
You can, however, operate a bank account, but you are limited to the amount of credit you can get from a bank.
The Irish Credit Bureau (ICB) holds your credit rating information. It is essential to bear in mind that exiting Bankruptcy does not positively affect your credit rating. Any credit facilities post-bankruptcy are a matter for the bank involved.
Can I still run my business?
You can continue to operate [but not own] a business during your Bankruptcy – you cannot be a director/owner/partner.
Unless the partnership agreement says otherwise, the partnership is dissolved on Bankruptcy if you are in partnership.
If your interest in any business has a value, the Assignee in Bankruptcy may seek to realise this value for the creditors.
Can I manage a company or become a director of a company?
In Bankruptcy, a bankrupt cannot act as a director, auditor, manager, liquidator, or company receiver.
If, however, you opt for the alternative to Bankruptcy, i.e. a Personal Insolvency Arrangement, there is no such restriction.
Can I travel outside the jurisdiction?
There is no outright prohibition on you travelling abroad unless you are leaving the State to avoid the consequences of your Bankruptcy. However, you have to inform the Assignee in Bankruptcy if you leave the country.
Are there alternatives to Bankruptcy?
Nothing prevents you from making a voluntary arrangement with creditors to settle debts due to them and avoid insolvency mechanisms or other proceedings against you.
As a rule, you cannot treat one creditor better than another, and you cannot transfer assets in advance of Bankruptcy at an undervalue.
You can avail of a Personal Insolvency Arrangement as an alternative to Bankruptcy. This is a mechanism administered by a Personal Insolvency Practitioner under the management of the Insolvency Service of Ireland.
It usually needs the agreement of the creditors to a proposal put to them on behalf of a debtor by the Personal Insolvency Practitioner.
Is my name on a Public Register?
The Public Register is kept as a record of all bankruptcies and personal insolvencies, including those discharged.
A person searching the Register is told the Bankruptcy (discharged) or personal insolvency status and the date it was discharged or completed. No information is given about their address.
After-effects of Bankruptcy
If you decide to go down the Bankruptcy route, some matters are worth keeping in mind.
The bankruptcy period is one year – but it can be extended if you do not make full disclosure or fail to cooperate.
All your assets remain with the Assignee after you come out ofBankruptcy – the exception is the family home which may come back to you after three years if not sold by the Assignee.
All your liabilities are written off – creditors must deal with the Assignee in Bankruptcy and not you.
You will live at a minimum level during the one year of Bankruptcy – and if you have earnings above this minimum, this will be paid to the Assignee for three years.
You are on a Public bankruptcy register – and your credit rating will be affected.
After one year, you are no longer insolvent and are free to start afresh.
It is critically important to investigate the likely outcome of bankruptcy where the family home is involved and where the bankrupt may wish to retain the family home.
For further advice or if you wish to discuss any other legal area please contact firstname.lastname@example.org or telephone 052-6124344.
The material contained in this blog is provided for general information purposes only and does not amount to legal or other professional advice. While every care has been taken in the preparation of the information. We advise you to seek advice from us about any legal decision or course of action.
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