Personal Insolvency

cycleoin

Hi Guys...

It's been a while since I last logged on... been busy. Anyone have any views on the laws in this country surrounding personal insolvency? With the recent "credit crunch" and the economic doomsday propaganda being peddled by the media lately, it got me to thinking, what can a natrual person do to try and get out of a debt hole.

We seem to have fairly sophisticated legislation in place for corporate entities facing financial difficulties such as examinership and voluntary liquidations... but there is nothing available for the individual. Save, of course, for the bankruptcy act 1988 which is a joke.

In England and Wales the voluntary scheme of arrangement is in place to allow individuals a chance to pay their creditors a proportion of the debt owed and have the surplus written of where a majority percentage of the creditors agree, thus giving the individual a lifeline to get out of debt. And the US have their chapter 14 bankruptcy sytstem in place. Is it time for Ireland to review its own personal insolvency laws?

I'm thinking of writing something on it, maybe a short article, it'd be my maiden article. I don't know what you guys think but any advice from TomYoung/JohnnySkeleton or any of ye would be warmly received!

Eoin

Tom Young

Eoin,

This has been done here and I came across it a few months back being offered by some firm of solicitors. I seem to remember that judicial attitudes to this are uncertain at best, similar to that of repossessions of family homes etc.

For the life of me can't remember where I saw this - possibly www.sbpost.ie but it was definitely an article rather than some throw away advert.

I believe the mechanism involved a declaration of protection under bankruptcy but not a full declaration of insolvency/bankruptcy - it was like a "hands up, I've no money, but will have at some stage. Give me a payment plan and freeze my accounts."

Sorry I am being vague.

Tom

Our man in Havana

The banks in particular will never bankrupt a natural person for what they see as minor debts. They prefer to drag out such matters by seeking installment orders in the district courts where they attempt to eek out a few euro a month rather that getting nothing at all which is a risk they take with bankruptcy. There is a mechanism in place for a debtor to go to the high court and declare himself bankrupt but as above it is a rarely used device. I would expect any creditors in particular the banks to oppose such an application.

I have not heard of any voluntary schemes like in the UK being offered here.

Victor

Could one "owe" a friend say €5 and get him to institute bankruptcy proceedings or do they need to be started by someone owed a certain amount of debt?

Our man in Havana

Currently they must owe at least €1935 to be able to be bankrupted.

cycleoin

It doesn't really come down to how much is owed and a simple procedure to become a bankrupt. An 'act of bankruptcy' has to have occured. And NOBODY wants to be a bankrupt in Ireland, the consequences are very very harsh, it's not like the states where the bankruptcy procedure is a way of liquidating a persons assets in order to satisfy his creditors while also giving the bankrupt a second chance

AARR

Has anyone experience of a Voluntary scheme of arrangement for small companies.
Which professional firms have been successful and responsive in this area?
Thanks, Tony

Tom Young

AARR wrote: »

Has anyone experience of a Voluntary scheme of arrangement for small companies.
Which professional firms have been successful and responsive in this area?
Thanks, Tony

Most of the big 5 law firms ...

AARR

Thanks Tom, for your reply.
We are looking for a small dynamic firm of accountants in Dublin city or near the M50, with experience to fight the case and win! Tony

Tom Young

AARR wrote: »

Thanks Tom, for your reply.
We are looking for a small dynamic firm of accountants in Dublin city or near the M50, with experience to fight the case and win! Tony

Well there are plenty. I think a firm such as Luby McStay might be a good one.

Remember to retain cash for pre-payments!

cycleoin

cycleoin wrote: »

Hi Guys...

It's been a while since I last logged on... been busy. Anyone have any views on the laws in this country surrounding personal insolvency? With the recent "credit crunch" and the economic doomsday propaganda being peddled by the media lately, it got me to thinking, what can a natrual person do to try and get out of a debt hole.

We seem to have fairly sophisticated legislation in place for corporate entities facing financial difficulties such as examinership and voluntary liquidations... but there is nothing available for the individual. Save, of course, for the bankruptcy act 1988 which is a joke.

In England and Wales the voluntary scheme of arrangement is in place to allow individuals a chance to pay their creditors a proportion of the debt owed and have the surplus written of where a majority percentage of the creditors agree, thus giving the individual a lifeline to get out of debt. And the US have their chapter 14 bankruptcy sytstem in place. Is it time for Ireland to review its own personal insolvency laws?

I'm thinking of writing something on it, maybe a short article, it'd be my maiden article. I don't know what you guys think but any advice from TomYoung/JohnnySkeleton or any of ye would be warmly received!

Eoin

We do have a Voluntary Scheme of Arrangement. It's under Section 87 of the Bankruptcy Act.
http://www.irishstatutebook.ie/1988/en/act/pub/0027/sec0087.html#sec87

Tom Young

Deleted User wrote: »

We do have a Voluntary Scheme of Arrangement. It's under Section 87 of the Bankruptcy Act.
http://www.irishstatutebook.ie/1988/en/act/pub/0027/sec0087.html#sec87

I think what was being referred to years ago above is something slightly different. Though the Section 87 provisions are operative, the reality is that the protection results in the petition being adjudicated. I believe Sean Fitzpatrick may have used this method and it resulted in a slightly different approach to the process but ultimately the same/similar end with greater costs to petitioners and the State ultimately.

Tom Young

Tom Young wrote: »

I think what was being referred to years ago above is something slightly different. Though the Section 87 provisions are operative, the reality is that the protection results in the petition being adjudicated. I believe Sean Fitzpatrick may have used this method and it resulted in a slightly different approach to the process but ultimately the same/similar end with greater costs to petitioners and the State ultimately.

Didn't even see the date! Shows the attention I was paying.

It is different I agree but still worth pointing out. The bankruptcy laws are in dire need of reform but every interest group has been pointing that out for 20 years!

Tom Young

Deleted User wrote: »

Didn't even see the date! Shows the attention I was paying.

It is different I agree but still worth pointing out. The bankruptcy laws are in dire need of reform but every interest group has been pointing that out for 20 years!

Personally I was quite surprised the 2010 Civil Law (Miscellaneous Provisions) Bill containing the proposed Bankruptcy reforms was not telescoped as part of the Governments 'wash-up' ... though there are a number of other provisions in that Bill that were causing issues e.g., regulation of private security firms, etc.

Ultimately I think the point that Eoin was trying to get at was to figure whether there could be a mechanism to write off debts with protection outside of the fully blown Bankruptcy process. Which here is just not available. Least that's the way I read it back then!

Tom

Tom Young

Tom Young wrote: »

Personally I was quite surprised the 2010 Civil Law (Miscellaneous Provisions) Bill containing the proposed Bankruptcy reforms was not telescoped as part of the Governments 'wash-up' ... though there are a number of other provisions in that Bill that were causing issues e.g., regulation of private security firms, etc.

Ultimately I think the point that Eoin was trying to get at was to figure whether there could be a mechanism to write off debts with protection outside of the fully blown Bankruptcy process. Which here is just not available. Least that's the way I read it back then!

Tom

I think a reform of the Voluntary Arrangement to provide a form of personal examinership would be good but it would require a sea-change in our attitudes to personal insolvency. Traditionally people who go bankrupt are consider pariahs of some sort. The rationale behind the 1988 Act as well as the 1990 Companies Act (ss 150 and 160 in particular) was to protect the average person from big bad business people and, in the case of the latter Act, the Phoenix Syndrome in particular.

That said, given the current situation it would be an apt time to bring in a new law but if we did the first people to avail of it would be the Sean Fitzpatrick's of this world and no Government wants to look like they created a way out for them.

dermot_sheehan

I'd agree.

And the cost of examinership should be reduced, perhaps by giving the Circuit Court jurisdiction for small businesses.

It's unfair that large companies can get have an opportunity to have scheme of arrangement approved, leases disclaimed and long term survival permitted by disclaiming short term onerous obligations, but the small pubs and restaurants in our city centres can not afford it.

Tom Young

Yes, but I'd be totally allergic to a Commercial Division of the Circuit Court as was featured on someone's manifesto - Might have been FG. If it is to be done then make it standard practice rather than allowing an empire build for exclusive suits. Restorations can happen, so why can't examinerships, saves cost.

dermot_sheehan

Just allow the Circuit Court to hear examinership applications where the turnover is under a certain threshold.

I'm not even sure that on its own would be enough to reduce costs unfortunately given that both an examiner needs to be employed and an independent accountant's report in support of examinership prepared.

Interestingly Cork Circuit Court (and its predecessor the County Court) exercised both a jurisdiction in bankruptcy for persons domiciled in the Cork Circuit and Admiralty for ships on the High Seas off Cork from 1888 until 1989.