Amendments to the bankruptcy Act

[Steve Thatcher]

Hello Posters here is my analysis of the new proposed Amendments to the Bankruptcy Act

Head 125 – Amendment of section 85 of Bankruptcy Act 1988 (as inserted by the
Civil Law (Miscellaneous Provisions) Act 2011)

Provide for the substitution of the section 85 (as amended) with the following text.
Automatic discharge from bankruptcy

Provide that

85 (1) Every bankruptcy shall, on the 3rd anniversary of the date of the making of the
adjudication order in respect of that bankruptcy, unless prior to that date the
bankruptcy has been discharged or annulled, stand discharged.

(2) Any bankruptcy subsisting at the commencement of this Act where the order of
adjudication in respect thereof was made before 3 years prior to the date of
commencement, is hereby discharged

(3) The bankrupt’s unrealised property shall remain vested in the Official Assignee
after discharge from bankruptcy.

(4) The bankrupt shall after discharge from bankruptcy have a duty to cooperate with
the Official Assignee in the realisation and distribution of such of his or her property
as is vested in the Official Assignee.

(5) The court shall, on application to it, have discretion to make and vary an order
requiring the discharged bankrupt to make payments from his or her income to the
Official Assignee or any other trustee for the benefit of his or her creditors for a
period lasting up to 5 years from the date of the discharge of the bankruptcy.

(6) In making the order under subsection (5), the Court shall have regard to the
reasonable living expenses of the bankrupt and his or her family and for that purpose,
the Court may have regard to any guidelines on reasonable expenditure and essential
income for debtors published by the Insolvency Service pursuant to Head 132 of this
Act.

(7) A person whose bankruptcy has been discharged by virtue of this section may on
application obtain a certificate of discharge under the seal of the Court.

(8) In this section "bankrupt" includes personal representatives and assigns.

I am not sure how many of you have seen the new amendments, but they are as above.

The key points are that you will now get an automatic discharge after 3 years instead of 12.
Any unrealised property remains vested in the Official Assignee after discharge
There is the ability for someone to make an apllication to the court for an order that payments be made for five years.

Questions which immediantly arise are:-
1. How long after discharge does un realised property remain vested in the assignee. We had this situation here in the UK. It used to be the case that if a house or pension wasn't dealt with and realised, it was filed in the Protracted Realsisations Unit. I dealt with cases whereby 20 years after a bankruptcy had ended we had the right to force a sale of a property whih now had lots of equity.
If this is the same here and there are no time constraints mentioned, it could be the case that in 20 years the Assignee writes to your asking for €100,000 from the equity now attached to the property.

2. Who has the right after the three year bankruptcy to apply to court for a five year payment plan. The Banks will love this. They get access to assets for three years and then if unrealised perhaps an unlimited time, and then access to any wealth you then build up for the next five years.

It seems to me that you could end up going bankrupt and yet still be on the hook for money you through you had written off for decades to come.

Where in here is the ability to write off your debts and re-start your life?

I would be really interested in your analysis of this and whether you welcome these changes.

Steve

 

[44brendan]

Could I ask for clarification/commentary on a couple of issues in your post Steve?

- Question 1; You mention that if a house or pension wasn't realised in the bankruptcy the assets remained vested in the assignee. I thought that pension funds were excluded from the assets vested in the assignee in UK legislation. Not sure whether new Irish legislation mentions pension pots! Also, why would the assignee not realise assets?

- Q2; Is there not a similar restriction in UK legislation with payment plan period limited to 3 years?

- The perception from the Heads of the proposals is that it is still considerably more favourable to the parties concerned to seek protection under existing UK bankruptcy than go for these peoposals. Is that your opinion?

 

[Steve Thatcher]

Could I ask for clarification/commentary on a couple of issues in your post Steve?

- Question 1; You mention that if a house or pension wasn't realised in the bankruptcy the assets remained vested in the assignee. I thought that pension funds were excluded from the assets vested in the assignee in UK legislation. Not sure whether new Irish legislation mentions pension pots! Also, why would the assignee not realise assets?

They are now, but my point, not very well expressed I admit was that they weren't and so we had situations where people who had gone bankrupt, literally decades before had their pensions raided and matrimonial homes taken off them. That has now all been addressed and pensions can't be taken and the home has to be dealt with in three years.
The Assignee might not realise assets because the property was in negative equity. If you have a situation whereby the property vests by operation of law into the assignee, the bankrupt may well stay in it, pay the mortgage and think it is his, but in reality it still belongs to the OA. If in 20 years when everyvody has forgotten about the bankruptcy he pops up, he can ask for his interest in the property to be realised.

- Q2; Is there not a similar restriction in UK legislation with payment plan period limited to 3 years?

The scenario is not the same. Don't forget in bankruptcy in the UK you are bankrupt for a year. The Official Receiver gets the statement of affairs and can cehck your income and outgoings for a year. If you earn just enough to pay our outgoings there will be no money for an income payments agreement and hence no money paid over for three years. In all my time I have never had a cleint yet that has paid an IPA.

In the new amendments it seems that the application for the lets call it "income payments order", as it doesn't have a name, can be applied for after the bankruptcy has ended, ie after three years, by ?, well who knows, it doesn't say. In the UK it would be the OR, here it could be anybody. What's the betting it might be the banks.
There is no guidance as yet as to what reasonable expenditure might be, what allowances you might be able to offset against your income.

My point is that this is so very woolly. I can see from this a bankruptcy regime and income payments platform that lasts 8 years.

I want to be wrong, but there is nothing here to convince me otherwise.



- The perception from the Heads of the proposals is that it is still considerably more favourable to the parties concerned to seek protection under existing UK bankruptcy than go for these peoposals. Is that your opinion?

Yes I may be acccused of having a vested interest in this because of what I do. That is fair enough and I accept that. But I can and do call things as I see them.
This is my analysis, others may disagree, but I cannot see anythig here that would encourage me to stay in Ireland and go bankrupt as opposed to move to the Uk and do the same thing.

But let's debate it.

Steve

 

[44brendan]

Thanks for the clarification Steve. As you say, the debate remains open. However, I agree that vested interest or not, there is no encouragement her to those who are significantly under water to favour the new legislation over a UK option. The only restriction appears to be the COMI requirement, which I note from your previous posts could be established by a 6 month period.

 

[Bronte]

But let's debate it.

Until it is clearer what exactly this bill is we cannot properly debate it. Maybe after more of the financial whizkids in the newspapers/media etc we will have a better idea.

 

[Brendan Burgess]

Until it is clearer what exactly this bill is we cannot properly debate it. Maybe after more of the financial whizkids in the newspapers/media etc we will have a better idea.

Hi Bronte

You have a decent insight into these issues. Read the section on Bankruptcy and make your comments. They are as valid as any of the whizkids.

I am focusing on the Personal Insolvency Arrangements.

Brendan

 

[drrkpd]

Could I ask for clarification/commentary on a couple of issues in your post Steve?

- Question 1; You mention that if a house or pension wasn't realised in the bankruptcy the assets remained vested in the assignee. I thought that pension funds were excluded from the assets vested in the assignee in UK legislation. Not sure whether new Irish legislation mentions pension pots! Also, why would the assignee not realise assets?

- Steve or Anyone

1 Does the new legislation mention Irish pensions??

2 Am I right that uk bankruptcy legislation has a defined "look back" period of all financial transactions of 5 years. Is there any similar in new Pension rules??

Thanks

 

[Steve Thatcher]

Could I ask for clarification/commentary on a couple of issues in your post Steve?

- Question 1; You mention that if a house or pension wasn't realised in the bankruptcy the assets remained vested in the assignee. I thought that pension funds were excluded from the assets vested in the assignee in UK legislation. Not sure whether new Irish legislation mentions pension pots! Also, why would the assignee not realise assets?

- Steve or Anyone

1 Does the new legislation mention Irish pensions??

2 Am I right that uk bankruptcy legislation has a defined "look back" period of all financial transactions of 5 years. Is there any similar in new Pension rules??

Thanks

Hello again,

Until a few years ago pensions weren't excluded from bankruptcies. It was therefore the case that a pension could be raided years later. The same for a property which wasn't dealt with. This has now changed.

My concern from these draft proposals is thatany assets which haven't been dealt with could be kept on ice and realised at a later stage.

It does seem that pensions haven't explicitly been excluded, and so must at present be included.

An assignee might not be able to realise some assets. Imagine someone going bankrupt for €500,000 on investment property. They might have a family home which they can afford the mortgage on. They could stay in the property, but it would remain vested in the assignee. Years later the assignee could demand the equity be paid to him.

Steve