The Minister for Justice, Equality and Defence, Alan Shatter, TD, announced the commencement of section 4 of the Personal Insolvency Act 2012 dealing with bankruptcy on 3 December 2013. Other elements of the act, including the introduction of alternative insolvency arrangements such as personal insolvency arrangements, have already been introduced.

The implementation of the new bankruptcy reforms is the last piece of the jigsaw as regards Ireland's new personal insolvency regime, following the introduction of the Personal Insolvency Act 2012.  This new regime effectively overhauls the antiquated pre-existing bankruptcy regime, bringing Ireland closer into line with our European neighbours. Overall, there is an emphasis in the new personal insolvency regime on first attempting to work out an arrangement with creditors, with bankruptcy itself as a last resort.

The Insolvency Service of Ireland has published a number of guides to the new regime, available here.

Some of the key changes introduced to the bankruptcy regime include the following:

  1. Critically, there will now be automatic discharge from bankruptcy after three years from the date of adjudication – a significant reduction from the current 12 years. This will have retrospective effect, meaning that people already declared bankrupt will be able to benefit from the shorter discharge period.  Bankruptcies currently existing for three years or more at today's date will be automatically discharged after a further six months have elapsed. This latter extension is an initial transitional period intended to permit the Official Assignee in Bankruptcy or a creditor to object to a particular discharge from bankruptcy should circumstances warrant it.
  2. While a debtor may emerge from bankruptcy after three years, the court may direct a debtor to continue making payments to creditors from his income or assets for a period of up to five years after being discharged.
  3. Individuals declared bankrupt will now be entitled to retain specified personal belongings (including clothing, household furniture) up to value of €6,000, a doubling of the previous threshold.
  4. The hardening periods in respect of certain pre-bankruptcy transactions have been increased to three years, meaning assets transfers made by a bankrupt within that period of time may be reversed.
  5. A sum of €20,000 or more must be owed to a creditor before he may petition for a debtor's bankruptcy, increased from €1,900.

Certain provisions of the Courts and Civil Law (Miscellaneous Provisions) Act 2013 were also commenced on 3 December 2013.These provide for changes to the Bankruptcy Act 1988, the most significant of which is the incorporation of the Office of the Official Assignee into the Insolvency Service of Ireland.

Earlier updates by this firm on the Personal Insolvency Act, 2012 can be accessed here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.