Bankruptcy Ireland - Is It Really The Best Way Out Of Debt?

It is well known that the state of Irish economy is in tatters. Since the  banking crisis the Irish economy has crashed, unemployment and immigration is on the rise again. More people are facing serious financial and debt problems due to negative equity in their homes. They bought houses at the peak of the market and since the crash house prices have plummeted by more than 50 %. Bankruptcy in Ireland is becoming a worrying trend that is on the rise.

Many are facing the truth that they can no longer afford to pay the expensive monthly interest  costs on their mortgage. They do not have the option of selling up and moving on as the house is worth a fraction of the value compared to when they bought it. In reality many people in Ireland are sinking into a spiral of debt.

Unless creditors are forgiving and willing to come to an agreed debt restructuring settlement then, the only real option is to declare themselves bankrupt and move on with a clean slate. However, bankruptcy in Ireland is not that simple. The process is archaic, expensive and leaves a long lasting and negative legacy.

What is Bankruptcy

Bankruptcy is a legal process that aims to protect both the debtor and creditor(s) based on the former not being able to pay their debts or where a debt settlement between the two cannot be reached.

Under bankruptcy laws the debtor is given legal protection, at a cost, and to enable them to free themselves from the burden of debt, hostile creditors and to begin a new life. In respect of the creditors the bankruptcy procedure aims to protect and serve the creditors by ensuring a percentage of the debtors assets and property are distributed to pay off the outstanding debts.

A person can be made bankrupt in 2 ways. They can either petition bankruptcy themselves or the creditors takes it upon themselves to start proceedings. As it is a legal process a person can only be judged as bankrupt by the court of law. When this happens the bankrupt has to transfer their assets to their appointed trustee.

In agreement with the court of law the role of the trustee is responsible for deciding which assets are to be distributed among the creditors. These assets can include the bankrupts home and any accrued stocks and shares. When all agreed assets have been distributed the person can be discharged from bankruptcy.

The Legal Consequences of Bankruptcy in Ireland

As I mentioned earlier becoming bankrupt is a way to rid yourself of debt but it comes at a cost. If you're contemplating about how to file for bankruptcy in Ireland you may want to consider the following implications first.

• Once adjudicated as bankrupt the persons assets are handed over to the appointed trustee for distribution to the creditors. 
• Any property or assets that are acquired after being declared bankrupt will also be disclosed to the trustee.
• If payment is made to settle the debts of one creditor over the others this will be considered as fraud and the payment reversed.
• A bankrupt persons salary or other income can also be disclosed to the trustee.
• It is a criminal offence for the bankrupt to set-up or manage a business in Ireland.
• The bankrupt will have to disclose of any cash amount above 630 Euros to the Trustee.
• It takes 12 years (one of the longest in Europe) to be discharged from bankruptcy.

There are items that are exempt from bankruptcy proceedings however, these are small in comparison to what you can lose. The bankrupt can retain the following items as long as they do not exceed 3,175 Euros.

• Household furniture
• Tools relating to their trade
• Clothing
• Bedding

The Rise of Irish Bankruptcy Tourism

Not so long ago when the Celtic Tiger was roaring personal bankruptcy in Ireland was unheard of. However, since the debt crisis and the increase in mortgage arrears the rate of bankruptcy is on the rise. As discussed above going down the bankruptcy route in Ireland should not be taken lightly.

In terms of the debtor bankruptcy Ireland laws are archaic, intrusive and leave a stigma that will last for 12 years. Rather than protect the debtor they punish them. Fortunately, the bankruptcy laws in Britain are for more helpful. Instead of 12 years, you can be discharged from bankruptcy after one year.

Now, you are probably thinking how is that going to help someone who is Irish? Well, there is a way for Irish citizens to take advantage of the bankruptcy laws in the UK. As Ireland is a member of the European Union Irish Citizens have the right under European Law to file for bankruptcy in the UK.

To take advantage of this law the person must relocate to the UK declare themselves bankrupt and after a year they can be discharged from bankruptcy and debt free. You will have to prove that you have settled in the UK, have a job and a tenancy agreement. Once you are discharged you can return to Ireland.

As the British government has a more progressive approach to personal insolvency than Ireland, many Irish people  are opting for this route rather than following the bankruptcy proceedings in Ireland and suffer for 12 years. This has been tagged recently in the media as "bankruptcy tourism"

If you wish to consider this option you should speak to bankruptcy and insolvency professionals for expert advice on this matter.