Open consultation for bankruptcy rule changes

The Oireachtas Justice Committee is having an open consultation for people who want to give their view on changing the bankruptcy rules so that a person is discharged after 1 year rather than the present standard of 3 years.

The page with the details can be found here, it closes on the 19th of June.

Our view is that 1yr would be of benefit to the people involved and give some extra creditor compulsion to dealing with debtors. On the other hand, there may be concerns about creditor lead petitions as well as ‘payment orders’ that could still go well beyond the one year term.

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Bankruptcy news

There are new bankruptcies occuring and often in differnt jurisdictions to help resolve peoples indebtedness.

Some of the recent ones are Waterford developer Darryl Kavanagh who is looking for bankruptcy in the US. That case involves €17m of debt with assets of c. €4.7m. Shortfalls like that are hard to resolve other than with bankruptcy.

Closer to home there were some creditor lead bankruptcies involving two former spread betting executives. In this case the people involved were hoping to avoid bankruptcy sumons’s but the judge ruled against them and they were adjudicated bankrupts. Creditor petitions are still by far the most popular bankruptcy course, we are of the opinion it is because the general population has yet to see that it is a debt solution as well, not just some kind of punishment.

Another thing which is often overlooked in bankruptcy is the cost to the creditors, here is an update on

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Some solutions don’t work

While there is provision within the insolvency code to allow a personal insolvency application with more than €3,000,000 of debt to be considered, it is not highly likely that we will see much of this. The reason being that insolvency solutions are often predicated on some level of reasonable recovery.

This is the same as examinership for companies, so the individual must be a ‘going concern’, where they aren’t then bankruptcy becomes the more viable option which is perhaps also more appropriate.

So the message is simple, don’t try to use solutions that don’t or won’t work. Insolvency is often critiqued for any manner of reasons, but that is in part because it isn’t the actual appropriate solution.

Equally, bankruptcy may not be, we had a client this week who would be better off working with the bank then opting to go to the UK for an IVA style solution, the only thing we know for sure is that there are no forgone conclusions in dealing with debt and each case is unique.

So be weary of getting into what …

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