# Recommendation: Judicial personal insolvency law: reform of the Bankruptcy Act 1988



## Brendan Burgess (1 Mar 2011)

The  Commission proposes a number of significant reforms in the current  judicial (High Court based), bankruptcy system, currently regulated by  the _Bankruptcy Act 1988_. The judicial bankruptcy process remains a  suitable mechanism to deal with large and complex cases or those that  can’t be resolved using the proposed non-judicial process (for example,  because a debtor did not act in good faith). *The main recommendations  are: automatic discharge from bankruptcy after 3 year*s, subject to (a)  leaving the bankrupt’s full estate (including any house) in the  bankruptcy; and (b) allowing the High Court’s Official Assignee in  Bankruptcy to order the bankrupt make repayments for up to 5 years;  increase from €1,900 to €50,000 the minimum debt level required to bring  a creditor’s bankruptcy petition; significant reduction in number of  priority debts in bankruptcy (including Revenue debts); introduce system  for bankruptcy similar to the procedures for the restriction and  disqualification of company directors.


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## Brendan Burgess (17 Apr 2011)

*The current position
*Under the 1988 Act, there is no provision for automatic discharge from bankruptcy. Around 300 people are unable to meet the minimum requirements for discharge i.e. pay the costs of the Trustee, so they may never be discharged. 

After 12 years, if you can pay the costs of the trustee and meet some other requirements, you can apply to the High Court to be discharged.


*The Civil Law (Miscellaneous Provisions) Bill 2010* provides for an amendment to the Bankruptcy Act 1988
(_This bill has not been enacted yet)_
(i) to reduce the application period to the court for discharge from  bankruptcy from 12 years to 6 years, subject to the existing conditions  in the law being met. This change was recommended by the Law Reform  Commission in its Interim Report on Personal Debt Management and Debt  Enforcement of May 2010, and


 (ii) for the automatic discharge of bankruptcies on the 20th  anniversary of the adjudication order. The discharge of these so-called  "legacy bankruptcies" should affect about 300 cases in the system.

 The Minister has decided to avail of the opportunity in this Bill to  introduce these measures so as to bring about some modest early reforms  to the law on bankruptcy in the short term. Long term reform in this  area will await consideration of the Law Reform Commission Final Report  on Personal Debt Management and Debt Enforcement, which is expected  before the end of 2010.


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## Purple (7 Nov 2011)

This answer to a priority question in the Dail may be of interest.

*40.* *  Deputy Stephen Donnelly*     asked the    *Minister for Justice and Equality* with regard to the forthcoming legislation revising the system of  bankruptcy, his views on the statement in the Keane Report that the  automatic bankruptcy discharge period under the judicial process could  be set as low as three years; the time period that he intends to set for  discharge from bankruptcy or personal insolvency; his views on the  total quantum or percentage of debt that will be discharged under the  new bankruptcy or personal insolvency process; and if he will make a  statement on the matter.     * [31293/11]* 

Deputy Alan Shatter:    In line with a commitment in the programme for Government  the personal insolvency Bill is in the course of being developed in my  Department to provide for a new framework for settlement and enforcement  of debt and for personal insolvency.  The commitment under the EU-IMF  Programme of Financial Support for Ireland is to publish the Bill in the  first quarter of 2012.  It is my objective to publish the measure ahead  of the EU-IMF deadline, if possible.  Moreover, it is intended that the  heads of the Bill, which are expected to be finalised in the near  future, will be forwarded to the Committee on Justice, Defence and  Equality for its consideration.
  The Deputy will be aware that in  developing the Bill, account is being taken of the recommendations of  the Law Reform Commission in its recent Report on Personal Debt  Management and Debt Enforcement.That report provided an in-depth review  of the personal debt regime.  The economic and financial effects of  certain of the new arrangements that are in contemplation are being  carefully assessed to ensure that all relevant issues are addressed and  their impact is fully anticipated and understood.
  The Deputy will also be aware that,  following the publication of recommendations in an interim report of  the Law Reform Commission, I provided in the Civil Law (Miscellaneous  Provisions) Act 2011 for the reduction of the period to apply to the  court for discharge from bankruptcy from 12 years to five years, subject  to the same conditions that currently exist and, for the first time in  Irish law, for the automatic discharge of bankruptcies on the 12th  anniversary of the bankruptcy adjudication order.  Those provisions were  commenced with effect from 10 October 2011.  A number of other mainly  technical improvements to bankruptcy law contained in the Act of 2011  are already in force since 2 August 2011.
  The question of a further reduction  in the period for automatic discharge of a bankrupt and the period for  application to the court for discharge from bankruptcy are being  considered in the context of finalisation of my proposals on the  personal insolvency Bill.  The decision will be made having regard to  the Keane report as well as the very focused discussion that continues  between my Department and key stakeholders to identify the optimum new  structures, at minimal cost, to bring about the reform.  This necessary  consultation, particularly in the context of the totally exceptional  developing economic situation, is greatly assisting the development of  detailed legislative proposals.
_Additional information not given on the floor of the House_
  As I have said in the House  previously, reform of our personal insolvency regime is not a simple  task.  It is a very complex area of the law and one where the  consequences and implications of new policies need to be very carefully  assessed.  There is a delicate balance to be struck between the various  legal rights of the parties involved.  We must design a system which is  fair to both creditors and debtors alike.  Not to do so would make worse  a situation that is already difficult for the parties concerned.
  The reform of bankruptcy law will  invariably focus on the length of the discharge period that will apply  to the person adjudicated bankrupt.  We debated this point in the House  during the passage of the Civil Law (Miscellaneous Provisions) Act 2011  in July.  Opinions varied as to the appropriate period.  There was  consensus that the one-year period that applies in the UK and Northern  Ireland is too short, but anything beyond five years is too long,  particularly if the bankrupt person has been fully compliant and not  behaved fraudulently in any way.  No final decision has been taken by  the Government in this regard.
  The quantum of debt that might be  discharged in any new bankruptcy or personal insolvency arrangements has  also yet to be decided.  In bankruptcy, the debtor’s assets are fully  realised for the benefit of creditors and that responsibility falls to  the official assignee or a private trustee in bankruptcy.  It is not, in  my view, realistic to, at this stage, attempt to set down the quantum  of debt that might be agreed to be discharged in the context of a  non-judicial debt settlement.  That would be a matter for the parties  concerned.  We must be mindful that in any debt arrangement, the debtor  or bankrupt must be left with sufficient income to meet reasonable  living expenses.  Given the complexity of the personal over-indebtedness  issue generally and the economic and financial implications of any  changes to the personal insolvency system, these are matters which will  require careful consideration by the Government.


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