State’s bankruptcy term cut from 12 years to three

Changes to legislation reducing the State's bankruptcy term from 12 years to three were announced today by Minister for Justice Alan Shatter.

Announcing the package of measures, the Minister said they “complete the reform of our personal insolvency and bankruptcy legislation”.

Mr Shatter said the measures “will address the circumstances of insolvent debtors”.

“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,” he said.

“Bankruptcies currently existing for three years or more at today’s date will be automatically discharged after a further six months have elapsed.”

There are currently a total of 189 people who have been adjudicated bankrupt by the court. Of these, 73 have been in bankruptcy three years and over and will now be eligible for automatic discharge six months from today’s date.

This delay is in order to allow time for an objection to discharge to be entered by the Official Assignee in Bankruptcy Christopher Lehane, who administers bankruptcy, or a creditor where they may consider it warranted.

Mr Lehane said the enactment of the legislation means there is now “a viable bankruptcy solution for debtors in financial difficulty”.

“With the bankruptcy period now reduced to three years, debtors are more likely to engage with a process which shields them from creditors and leaves them debt free after three years,” he said.

“I am satisfied there are adequate safeguards in the reform measures that only those who cannot pay can avail of bankruptcy.”

Mr Lehane added that he expects “a significant rise” in bankruptcies, particularly by debtors who make up 85 per cent of applicants in the UK.

“We have increased our bankruptcy staff numbers four-fold, recruited experts from the insolvency sector, and are acquiring a specialist insolvency IT system to assist us manage a high volume of cases.”

A key feature of the legislation includes the requirement for debtors to show they have made reasonable efforts to avail of a debt settlement arrangement or a personal insolvency arrangement in order to be eligible for bankruptcy.

Insolvency Service of Ireland (ISI) director Lorcan O'Connor said the legislation was "good news for people who are struggling with personal debt".

“We now have a full suite of debt solutions available to people who are insolvent that will ensure they can return to solvency in a fair, transparent and equitable way.

“Having the bankruptcy process become part of the ISI makes it easier for debtors as there is now a single point of contact for anyone dealing with over-indebtedness.

“It enables the ISI to administer all debt solutions from one place, improving efficiencies and streamlining the process.”

Other elements of the act, including the introduction of alternative insolvency arrangements such as debt relief notices and personal insolvency arrangements, have already been introduced.