# In bankruptcy, fo some creditors take priority above others?



## Adecco (15 Apr 2016)

i am most likely going youp bankrupt. 

I owe a bank c. 500k and the revenue c. 50k

How is any cash I have distributed ?
Does revenue automatically take priority?
Or does it get divided up proportionally ?


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## vandriver (15 Apr 2016)

Just curious, why would this be your concern?


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## breakonthru123 (15 Apr 2016)

From my research, it would seem that Revenue take precedence over Banks when liquidating assets after declaration of bankruptcy.

This means that if you owe Income Tax, NPPR charge, LPT tax, etc - then all these amounts have to come off the assets when sold..

The logical upshot of this is two things..

1) If you're committed to bankruptcy (and are aiming for income to go below RLE amounts) - then paying any of these taxes does not make sense. Revenue will get it all (plus surcharges) when the sale of the assets occur. Better to stick cash saved - under a mattress and use it during bankruptcy period..

2) if you think you can negotiate a write down of your loan prior to bankruptcy - I would suggest it might be worth your while telling the financial institution that all these costs are 'coming down the line' for them should you be forced to initiate bankruptcy.

Maybe, they would be welling to 'cut a deal' - when the full cost of bankruptcy is laid out 'versus' a 'less' substantial write down.


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## 44brendan (15 Apr 2016)

Bank will take precedence in respect of any security held.


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## Jim Stafford (15 Apr 2016)

When doing deals with the bank it can be a good idea to show a comparison of what the banks would get in a bankruptcy as opposed to the proposal.  A heavy level of Preferential Creditors could motivate the bank to accept a proposal.

there are a number of Prefs in a bankruptcy, such as rates, wages of staff etc. In the Revenue's case, a preferential debt means:

·  The VAT/PREM/RCT tax debt for twelve months prior to the date the Protective Cert (in the case of a PIA/DSA) or the date of bankruptcy

·  The twelve month IT/CGT period with the largest tax debt and any interest chargeable on the period.


Jim Stafford


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## Adecco (15 Apr 2016)

Jim

Thanks for your reply - but I don't fully understand it.

I owe the tax man paye tax for a retrospective off shore tax plan that has since been declared as tax avoidance by tax man. (It's uk HMRC by the way - I live in U.K.)

Upon bankruptcy, does this debt take precedence over Irish bank ?

And just to clarify - the properties are sold. It's just a lump of residual debt leftover. 
I've got a small lump sum available only. 

I've been in uk 6 years - but payment made up u tip a year or 2 ago.


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## Jim Stafford (18 Apr 2016)

You may have gathered by now that this forum is focused on Irish consumers.

What I can tell you is that the Crown preference in the UK was abolished in 2003.  Accordingly, any UK taxes owed now rank equally for dividend with unsecured creditors.

If you have a lump sum available you should consider doing an Individual Voluntary Arrangement in the UK.


Jim Stafford


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## Outsider (21 Oct 2016)

If an individual settles a Revenue debt (including interest and penalties) and subsequently declares bankruptcy can other creditors e.g. bank contest the payment made to Revenue?


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## Jim Stafford (21 Oct 2016)

In order for the Official Assignee to challenge any payments made by a debtor to another creditor he would have to prove the debtor "intentionally" preferred that creditor.  In the case of payments to the Revenue, it would be difficult to prove "intention" as the Revenue have stronger collection powers than other creditors etc.

Jim Stafford


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## Bronte (21 Oct 2016)

Jim Stafford said:


> When doing deals with the bank it can be a good idea to show a comparison of what the banks would get in a bankruptcy as opposed to the proposal.  A heavy level of Preferential Creditors could motivate the bank to accept a proposal.
> 
> there are a number of Prefs in a bankruptcy, such as rates, wages of staff etc. In the Revenue's case, a preferential debt means:
> 
> ...



Do rates and staff wages come before secured debt like bank mortgages/ loans? What about prsi the employer is supposed to have paid for staff?


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## Jim Stafford (21 Oct 2016)

Bronte said:


> Do rates and staff wages come before secured debt like bank mortgages/ loans? What about prsi the employer is supposed to have paid for staff?



Secured debt is secured debt i.e. it gets paid in priority to all creditors.

Jim Stafford


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## Bronte (21 Oct 2016)

That's what I thought. Thanks.


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## Outsider (21 Oct 2016)

Jim Stafford said:


> .... he would have to prove the debtor "intentionally" preferred that creditor.  In the case of payments to the Revenue, it would be difficult to prove "intention" as the *Revenue have stronger collection powers* than other creditors etc.
> 
> Jim Stafford



Thanks for reply.

If the Revenue debt related to unpaid tax that predates the bank loans taken out does this strengthen (or maybe weaken??) Revenue's "collection powers" do you think?


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