If you are in debt and cannot meet your repayments in full as they fall due, formal debt solutions can be an option. There are solutions under the Personal Insolvency Act 2012 (pdf) to help you clear your debt problems over a period of time.
Each debt solution can affect your life in different ways. You will need to think very carefully about declaring yourself bankrupt because it is a serious decision with serious consequences.
Find out more about what bankruptcy means and whether it’s the best solution for you.
What is bankruptcy?
If you are in debt and unable to pay your debts in full as they fall due, you may be eligible to apply for bankruptcy. Bankruptcy is a formal insolvency option of last resort to deal with debts over €20,000. The High Court will decide and you may be able to write off (cancel) the debt.
During the bankruptcy process all assets, including your share in the family home, and other property and possessions are transferred to a court official called the Official Assignee (OA). They then arrange for your assets to be sold and the money shared between your creditors. The Official Assignee is based in the Insolvency Service of Ireland (ISI).
While it is possible, you should not assume you will lose your family home in bankruptcy.
The Official Assignee will deal with your creditors for you, so this will put an end to any demands for unpaid debt. This means no more stressful calls, letters or visits from your creditors.
You apply to the Examiner’s Office in the High Court and attend Court on the date your application is listed. Once your bankruptcy is granted, you then deal with the OA, who will deal with your property and creditors.
There are a number of restrictions and terms that apply for the period you are bankrupt. You can find out more about this on the ISI’s website.
How long does bankruptcy last?
Bankruptcy automatically ends after 1 year. This term could be shorter if you can settle with your creditors. Or it could be longer if you do not co-operate with the Official Assignee (OA) or do not tell the OA about all your property and goods. When the bankruptcy term is over, you are released (‘discharged’) from your bankruptcy restrictions. Most of your outstanding debts are written off and you can make a fresh start.
There may still be decisions to reach about the property, and you may still have to make payments for up to 3 years in total. But there are reasonable living expenses allowed.
Am I eligible for bankruptcy?
Before you consider applying for bankruptcy, you must first have explored other insolvency solutions such as:
- a Debt Relief Notice (DRN)
- a Debt Settlement Arrangement (DSA)
- a Personal Insolvency Arrangement (PIA)
You can contact MABS to get advice about these options.
To be eligible for bankruptcy:
- You must have debts over €20,000
- You must be insolvent (unable to pay your debts in full when they are due)
- You must pay a fee, submit financial documents and make sworn statements about your finances, where you live or run your business and agree to advertise your bankruptcy
- You must show the court that you’ve made all reasonable attempts to try the other insolvency solutions without success. A Personal Insolvency Practitioner (PIP) can give you a certificate for the court.
A PIP is a person authorised by the ISI to support debtors to make insolvency solutions. Check if you are eligible for financial support to consult a PIP under the Abhaile Scheme or Contact MABS. You can choose a PIP from the Register of Personal Insolvency Practitioners published by the ISI or call the ISI’s information line 076 106 4200, Monday to Friday from 9am to 6pm.
What are the consequences of bankruptcy?
You will need to think very carefully about bankruptcy as an option because it can have serious consequences to all parts of your life. It can affect your ability to get a loan, your home, your business, and your reputation.
- It will be more difficult to take out credit while you’re bankrupt.
- If you rent your home, your landlord could end your tenancy.
- It is possible you could lose your home, this depends on how much it’s worth after any amounts secured on it are repaid.
- If you own a business, it might be closed down and the assets sold off.
- If you are in a business partnership, the partnership is automatically dissolved unless the partnership agreement provides otherwise.
- Going bankrupt can affect your immigration status.
- Your bankruptcy will be published publicly.
How much does it cost to go bankrupt?
When applying to be declared bankrupt, you must pay €200 to the Official Assignee. If you are getting professional or legal advice the cost can vary. There may be other costs throughout the process (see ‘How to I declare myself Bankrupt’).
These costs and charges include:
- Placing an advert in a national newspaper
- Swearing an affidavit (A sworn affidavit is a written, signed and sworn statement of truth witnessed by an official person such as a practising solicitor)
- Placing a notice in Iris Oifigiúil (the State gazette where the Government makes official announcements)
How do I declare myself bankrupt?
There are several steps you must take when you have decided to make yourself bankrupt. You can take the steps alone, but we advise you get professional help.
The process is summarised below:
|Possible step||What happens|
|1. Get professional help||The Irish Mortgage Holders Organisation (IMHO) provides a free service in relation to bankruptcy. These do not include Official Assignee (OA) and court administration costs.|
|2. Pay your Official Assignee||Lodge €200 with the Official Assignee.|
|3. Complete your petition (documents) and submit it to Examiner’s Office to get a court date||Complete your petition, which must be verified by a sworn affidavit and a sworn statement of affairs. A sworn affidavit is a written, signed and sworn statement of truth witnessed by an official person such as a practising solicitor, Commissioner for Oaths or an officer of the Court. A statement of affairs is a written summary of all your financial circumstances. Get your documents stamped at a court Stamp Office.
File the stamped documents and statement of affairs at the Examiner’s Office and get a court date.
|4. Attend the court hearing||Attend the court hearing on that date – the judge will grant your bankruptcy (if satisfied you meet the conditions).|
|5. Be interviewed about your assets and debts||Meet the Official Assignee or Bankruptcy Inspector to be interviewed about all your assets and debts. You must fully co-operate with the Official Assignee and their staff in the administration of your estate.|
|6. Place a notice in Iris Oifigiúil||Within 21 days, place a notice of your bankruptcy in Iris Oifigiúil (the State gazette). You must also place a notice of your bankruptcy either on the ISI’s website or in a national daily newspaper.|
|7. Take part in reviews of your financial circumstances with your OA||During the year, take part in any reviews of your financial circumstances and co-operate with the OA and staff in the administration of your property and debts.|
|8. OA keeps ownership of unsold assets when bankruptcy officially ends||Once the bankruptcy ends (discharged), ownership of any unsold property or other assets remain with the OA. If payments to creditors have been agreed in your case, you must continue to pay up to 3 years in total.|
What happens once I’m made bankrupt?
Effect on your debts
- All your unsecured debts are written off.
- The Bankruptcy Division of the ISI will be in touch with you to administer your bankruptcy.
- Your creditors can no longer contact you – they must deal with the Official Assignee.
- You will have use a part of any money that comes in to pay towards your debts for up to 3 years.
Effect on your assets
- Your property and possessions are transferred to the Official Assignee.
- Essential assets up to a value of €6,000 (which includes a vehicle) are not transferred.
- Your bank accounts will be frozen, except for one current account in which you can keep a balance of up to €1,000 for general living expenses.
- The Official Assignee then arranges for the transferred items to be sold and the money generated from the sale is distributed to your creditors.
Effect on accessing credit, spending money and other personal restrictions
- You can’t get credit (a loan) of over €650 without telling the lender that you are bankrupt.
- You must tell the Official Assignee if you are going abroad during your bankruptcy term.
- You are entitled to have a reasonable standard of living. This includes food, clothing, education, healthcare, and a modest allowance for savings.
- Your circumstances are reviewed from time to time by the OA and you must co-operate fully.
How long bankruptcy lasts
- You normally are discharged from bankruptcy after 1 year.
- You may continue to make payments for up to 3 years in total.
Read more about bankruptcy and the process for declaring yourself bankrupt from the ISI. There is information on the forms that you need and detailed notes on the process (pdf). You can read a set of scenarios (pdf) and a guide on what happens after you are made bankrupt (pdf).
What are my other options for tackling debt?
Bankruptcy is your option of last resort and is not for everyone. There are many ways to deal with debts and bankruptcy might not be the best solution for you. Talk to MABS if you need any more information or find out more about tackling debt options.
Creditors often prefer to come to an arrangement with you to repay debt, without taking legal action and going to Court.
If you have unsecured debts of less than €35,000 and are on a low income and have few assets, a DRN might be a more suitable option for a fresh start. A DRN will not be suitable if you have a mortgage. Debts are written off after 3 years of supervision and no payments are required unless your circumstances increase above a set amount during the supervision time.
There are no minimum or maximum limits on your debts, assets or income but all of your debts must be unsecured.
A PIA covers both secured and unsecured debts so may suit if you have a mortgage. There are no maximum limits on your assets, income or unsecured debts, but your secured debts must be €3 million or less (unless your creditors allow more).