Reduction of the Bankruptcy Period

February 11, 2016

The introduction of the Bankruptcy Act 1988 saw the first real reform to this area of law in over one hundred years and went some way to modernising and consolidating the existing legislation by bringing it into line with the law relating to corporate insolvency.

Despite the introduction of the Bankruptcy Act 1988 the number of people availing of the bankruptcy process remained low owing mainly to the draconian and lengthy adjudication period of twelve years which was not in line with neighbouring jurisdictions.

Personal Insolvency Act 2012

This inconsistency with neighbouring jurisdictions was addressed with the introduction of the Personal Insolvency Act 2012 which reduced the adjudication period to three years.  However, this was still longer than the period of one year which applied in Northern Ireland, England and Wales and as a consequence there were a number of high profile applications by debtors seeking to have themselves adjudicated bankrupt in neighbouring jurisdictions. This in turn led to expensive applications to the Courts in this jurisdiction to prevent debtors availing of more lenient adjudication periods elsewhere.

Bankruptcy Act 2015

The introduction of the Bankruptcy Act 2015 (“2015 Act”), which came into effect on 29 January 2016, has implemented a number of further changes to bankruptcy law the most relevant of which are as follows:

Bankruptcy Period

The 2015 Act reduces the bankruptcy period to one year for debtors adjudicated bankrupt after 29 January 2016. This brings Irish bankruptcy law into line with neighbouring jurisdictions and will curtail the trend of forum shopping which had developed among debtors over the past number of years.

The following dates will apply to debtors who were adjudicated bankrupt before 29 January 2016:

  • Adjudicated on or before 29 July 2013 – Original three year discharge date will apply
  • Adjudicated between 30 July 2013 and 29 July 2015 – Discharged 29 July 2016
  • Adjudicated after 30 July 2015 – Discharged on first anniversary of adjudication

All of the above dates are on the basis that a bankruptcy period is not extended due to non-disclosure by the Bankrupt.

Income Payment Orders

The 2015 Act provides that income payment orders made after 30 July 2016 will terminate on the third anniversary of adjudication. This represents a reduction of two years but it is predicated on cooperation and full disclosure by the Bankrupt.

Re-vesting of family home in discharged bankrupt

The 2015 Act provides that in the event that the Official Assignee (in whom the Bankrupt’s property vests) does not seek the sale of a family home within three years and subject to certain conditions contained in the 2015 Act,  the family home will re-vest in the Bankrupt on the following dates:

  • Adjudicated before 29 July 2013 – 29 July 2016
  • Adjudicated on or after 30 July 2013 – third anniversary of adjudication

Conclusion

The changes implemented by the 2015 Act represent a fundamental shift in the objective of the law from being a pro-creditor means of collection to being a more pro-debtor means of reform which aims to promote general economic recovery and to bring Irish bankruptcy law into line with other EU member states as was first envisaged by the European Insolvency Regulation.[1] It is certainly welcome news for Bankrupts and those debtors considering the bankruptcy process.

Please note that this article is for information purposes only and does not constitute legal advice. Specific advice should always be taken in given situations. 

Should you have any query in relation to this article or a related legal issue, please contact a member of our Insolvency Team.  

[1] Council Regulation 1346/2000/EC of 29 May 2000 on insolvency proceedings

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