Key Post How to stop a creditor making you bankrupt

Jim Stafford

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Debt collection is about the application of pressure, and sometimes a creditor will bring a bankruptcy petition to apply the maximum pressure to a debtor. If you are faced with such a petition, can you block it? Yes, you can, by utilising Section 12(2) of the Bankruptcy Act 1988, which I set out below.

(2) In considering whether it is appropriate to make an order under subsection (1) the Court shall have regard to whether or not the petitioning creditor had unreasonably refused to accept proposals made in connection with a proposal for a Debt Settlement Arrangement or a Personal Insolvency Arrangement pursuant to the Personal Insolvency Act 2012.

Invariably speaking, a PIA/DSA will always produce a better result for creditors than a bankruptcy, simply because the costs of a bankruptcy can be so expensive. (For example, up to 15% of asset realisations might have to be paid in Court Duty.)

We have successfully blocked a number of bankruptcy petitions by creditors by utilising Section 12(2). In some cases, we did not even have to put the debtor through a PIA/DSA procedure as we were able to negotiate an informal settlement.

The best way to deal with any possible bankruptcy petition is to fully engage with the creditor early on, make full disclosure etc. Leaving it too late may invariably lead to a bankruptcy petition being served on you, which would then mean that you would have to incur the costs of formally instructing solicitors and counsel to block it in the High Court.

Having said the above, sometimes bankruptcy might be the right option for you, and the creditor might be doing you a favour!

Jim Stafford
 
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What do you mean that 15% of the asset realisations might be the costs of court.

I thought the fees were fixed? I also thought they were relatively cheap now for bankruptcy. And what's with the 'might'? Is it based on a whim.
 
Bronte

The costs and fees are very much prescribed. The most significant cost in a bankruptcy can be the Court Duty which is applied on Realisations at the following rates:


> €2,000 – 0

Next €1,500 – 100%

Next €6,500 – 50%

Up to €1m – 15%

Over €1m – 1%

Whilst we all complain about the costs of bankruptcy, the high costs do help PIPs demonstrate that a PIA/DSA is nearly always better than a bankruptcy.

Jim Stafford
 
I don't ever remember us discussing this on the bankruptcy threads, so it surprised me. I can well see then why a bank would prefer not to want to go down this route too.

Amazingly enough it's better to be worth 1 million and 1 euro then 1 million.
 
I don't ever remember us discussing this on the bankruptcy threads, so it surprised me. I can well see then why a bank would prefer not to want to go down this route too.

Amazingly enough it's better to be worth 1 million and 1 euro then 1 million.
I'm assuming the one percent applies only to the excess .
 
I'm assuming the one percent applies only to the excess .

Yes, the 1% only applies to asset realisations over €1m.

For a detailed review of how the Official Assignee's costs of Administration Fee, Realisation Fees and Distribution fees are calculated, you may look at the following case studies on the ISI web site.

[broken link removed]

Jim Stafford
 
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