Bankruptcy is the most unfortunate thing to encounter. It is a formal legal process in which an individual declares his inability to pay off remaining debts. When debts exceed assets, the only way to counter them is by declaring bankruptcy. One files the bankruptcy application in the Office of Examiner of the High Court.
It is possible to declare yourself bankrupt in the event of no possibility of paying debts anytime soon.
However, a lender you owe also shares the right to declare the person bankrupt. It is in case one defaults on a considerable sum like unsecured loans in Ireland and does not share the potential to repay it.
Once declared bankrupt, the Official Receiver (OR) seizes the person’s assets and is referred to as the Trustee in Bankruptcy. It is a legal agreement stating the person’s cooperation in disposing of the assets.
The OR seizes all the assets, excluding the necessities like furniture, utensils, and clothes. The officer freezes the bank account. The officer ensures that the assets get distributed the right way to the creditors, and if debt persists, it gets waived.
You may not open one before the authority deems you to clear off the debt—bankruptcy lasts for one year. You can open up a new account afterwards. However, it would help if you informed the bank personnel about your previous history of bankruptcy to avoid issues later.
All your debts get written off by the OR after you file for bankruptcy.
When must One File for Bankruptcy?
Bankruptcy, in some cases, is an ideal thing to safeguard your property. And if you relate to the below points, bankruptcy is the best solution.
- If you have large debts like- mortgages, student loans, or unsecured debts, that you may find difficulty repaying
- If your creditor does not want to negotiate, you do not have the income and assets to pay the debt.
How to Legally File for Bankruptcy?
Here is how you to begin the process of declaring bankruptcy:
Connect with the Official Assignee
If your debts exceed €20000, connect immediately with the Official Assignee of the government and pay €200. Confirm your lodgment with a scanned bank statement copy.
The bankruptcy file must have this receipt before checking in with the Office of the Examiner of the High Court.
Work on Petition
You must prepare a Petition for bankruptcy stating:
- Undertake to advertise notice of bankruptcy adjudication directed by the authority
- Make statements regarding COMI (Center of Main Interest) for domicile-related matters.
- Swear Affidavit
You must swear an Affidavit stating that you make reasonable efforts to leverage alternatives to your rescue. An affidavit is a sworn statement made by the bankrupt personnel to affirm something true; before the authoritative personnel, he could be Commissioner of Oaths. The bankruptcy filer must pay €10 on the swearing Affidavit and €2 after that.
File a Statement of Affairs
One must present a Statement of Affairs which draws out your financial situation and the debts exceed €20000. It must align with the Affidavit filed.
You must bring the receipt with €200 to pay the Officer Assignee.
The authority will provide a court date.
Interviewed by Official Assignee
The Official Assignee interviews the bankrupt regarding the assets and debts. One must cooperate with the personnel by providing authentic details.
Post this; the Official Assignee will be in touch with your financials and ongoing obligations. The person gets free of charges post a year of filing bankruptcy.
However, the ownership of the unsold property remains with the Assignee. If you made any income order during filing for bankruptcy, abide. The person must abide by that for three years from the date of the agreement.
What are Some Other Alternatives to Declaring Bankruptcy?
If you have decided to file for bankruptcy, research. Seek other alternatives to bankruptcy. Check if they might suit you. Yes, there are other options that you may prefer in situations of high-interest loans in Ireland with no credit check debts:
Individual Voluntary Arrangement (IVA)
It is an agreement to settle all debts, including regular payments and lump sum contributions. It is a formal agreement authorized by an insolvency practitioner.
Also, it prevents the creditors from taking action against the borrower and bankruptcy. However, one must comply with the IVA terms to avoid bankruptcy.
Debt Management Plan
In this, the borrower connects with a debt management company to settle off debts. The company works on the part of the borrower and helps distribute contributions among the creditors. The option is only valid in the case of unsecured loans in Ireland.
Debt relief Order
Suppose your debts total to less than €20000 with little spare income. The order may help avoid bankruptcy.
What Debts can and cannot be included in the Bankruptcy?
Before filing for bankruptcy, check the below table to have an idea of the debts that one can file for:
Debts that can be included:
- Personal loans
- Credit Card loans
- Business/commercial loans
- Revenue debts
- Family maintenance debts
- Personal Guarantees
- Unsecured property portion
- Trade debts
Debts that cannot be included:
- Court fines regarding any criminal offence
- New debts after filing for bankruptcy
Debts that may be included:
- Secured Debt (Mortgages)
What Happens After Filing Bankruptcy?
Here are some scenarios that you might face in different aspects of life after declaring bankruptcy:
Self-Employed Individuals
If you operate as a self-employed, the Trustee may rightfully claim all your business assets. You may commence trading but must abide by certain restrictions.
You will have to pay your debts from income for up to 3 years (Income Payment Agreement). The authority decides the contribution amount after evaluating your income and expenditures, and other liabilities.
Employed Individuals
You can continue in your current employment. However, as per the company act 1963, one cannot act as the following in any organization:
- Director
- Auditor
- Liquidator
- Manager
- Receiver
Assets
As mentioned in the article, once you declare bankruptcy, the Official Receiver may seize and distribute all your assets to creditors.
“What happens to my house after bankruptcy?”- If this is your question, here is the answer.
If you own the property, you will have to sell the property. And if the property price is less than the total debt, the creditor may seize it too.
However, a joint owner, family, and friends may save the deal by offering to buy your equity share. It is beneficial if there is little equity.
Earnings
After analyzing your income, outgoings, and debts, the Official Receiver decides if you must make payments to the creditors.
Suppose you don’t abide by the income payment agreement, as mentioned in the alternative for self-employed individuals. In that case, the Official may take legal action by getting an order from the court.
If in case the circumstances change financially, inform the OR (Official receiver). It will help him review the arrangements.
Miscellaneous Charges
The Official Receiver (OR) or the Trustee can make further charges following a bankruptcy order:
- Public Examinations
- Applications to suspend automatic discharge
- Private examinations
- Permission to act as a director
The Receiver may not claim Pension rightfully. However, one can use it to pay over debts.
What are your responsibilities after Declaring Bankruptcy?
You must:
- Provide the details of current or improved finances to OR
- Handover the assets to OR with proper documentation and legalization
- Inform trustee about improved financial or new job
- Stop using credit cards altogether
- Do not make any loan payments directly to the creditor
Take Away
So, this is how bankruptcy affects the individual or business. Encounter the early signs and consult an expert to decide what is right. Be watchful of your initiatives during and after months of declaring Bankruptcy.
