Information for Creditors

The personal insolvency legislation seeks to balance the interests of debtors, creditors and the common good. The Act recognises that creditors have a legitimate interest in recovering debts due to them: one of the objectives of the Act is to enable creditors to recover debts owed by insolvent debtors, to the extent that the means of those debtors reasonably permit, in an orderly and rational manner.

Both debtors and creditors have certain rights and obligations under the Act.

There are three insolvency solutions that are alternatives to bankruptcy:

• Debt Relief Notice
• Debt Settlement Arrangement
• Personal Insolvency Arrangement

The Debt Settlement Arrangement and Personal Insolvency Arrangement processes involve a creditors’ meeting at which creditors will be entitled to vote on the proposed arrangement.

A qualified majority of creditors will be required in order for the meeting to approve the proposed arrangement. A creditor voting at such a meeting will wish to consider whether, having regard to the financial circumstances of the debtor, the proposed arrangement represents a fair financial outcome for the creditor, in particular when compared to the alternative of the debtor being adjudicated bankrupt.

The Act does not require creditors to participate in the DRN, DSA or PIA processes. However, the Act contains provisions which may have adverse implications for certain creditors where they decline to participate. It should be noted that non-participation by a creditor will not prevent an insolvency measure provided for under the Act from coming into effect and binding that creditor.

Rights of creditors under the Act include:-

• the right to information about the debtor’s financial position;
• the right to make submissions to the personal insolvency practitioner regarding the manner in which the debts might be dealt with under the terms of a Debt Settlement Arrangement or Personal Insolvency Arrangement;
• the right to vote at a creditors’ meeting in respect of a Debt Settlement Arrangement or Personal Insolvency Arrangement;
• the right to share in distributions to creditors under a Debt Settlement Arrangement or Personal Insolvency Arrangement in accordance with the terms of the relevant arrangement and the provisions of the Act;
• where the debtor’s financial position improves during the period of a Debt Relief Notice, Debt Settlement Arrangement or Personal Insolvency Arrangement, the right in certain circumstances to increased payments from the debtor in the case of a Debt Settlement Arrangement or Personal Insolvency Arrangement and the right to receive payments which they would not otherwise be entitled to receive in the case of a Debt Relief Notice;
• the right to special protections as a secured creditor in the Debt Relief Notice and Personal Insolvency Arrangement processes (note – a secured debt cannot be included in a Debt Settlement Arrangement);
• the right to contest the granting of (i) a protective certificate (in the case of a Debt Settlement Arrangement or Personal Insolvency Arrangement process) or (ii) a Debt Settlement Arrangement, Personal Insolvency Arrangement or Debt Relief Notice, in the appropriate court on the grounds and within the time limits specified in the Act.

A protective certificate is a document issued by the Court which offers the debtor and their assets protection from legal proceedings by creditors while they are applying for a DSA or PIA.

In general, a Protective Certificate remains in force for 70 days but it may be extended in limited circumstances.

Obligations of creditors under the Act include:

• an obligation not to initiate any legal proceedings or seek to recover payment of a relevant debt in respect of which a Debt Relief Notice, Protective Certificate, Debt Settlement Arrangement or Personal Insolvency Arrangement is in effect;
• an obligation not to contact the debtor regarding payment of a relevant debt in respect of which a Debt Relief Notice, Protective Certificate, Debt Settlement Arrangement or Personal Insolvency Arrangement is in effect;
• an obligation not to terminate or amend certain agreements with the debtor by reason only that the debtor is insolvent where a Debt Relief Notice, protective certificate, Debt Settlement Arrangement or Personal Insolvency Arrangement is in effect; and
• an obligation to comply with the requirements of the Act when filing a proof of debt where requested to do so by a Personal Insolvency Practitioner; and
• an obligation to comply with the requirements of the Act when valuing security for a secured debt as part of the Personal Insolvency Arrangement process.

The ISI has published a Detailed Bankruptcy Guide. This document provides detailed information on the implications and processes of bankruptcy in Ireland. While it is written from a debtor’s perspective, it is relevant to all stakeholders.

Confirmation of Security (effective for any adjudications from 29th April 2019)

As all assets vest in the Official Assignee (OA) as a matter of law on adjudication the objective of the OA in the first instance, following a person being adjudicated bankrupt, is to determine if assets secured to a liability have equity that can be sold for the benefit of unsecured creditors.

The Confirmation of Security Form (below) should be used where you either currently hold security over an asset in the name of a bankrupt, or where your security has been disposed of, and a residual unsecured debt remains. This confirmation will allow the OA to take the necessary decisions in relation to the asset in order to progress the case.

This form should be returned within 21 days of the date of adjudication.

Proof of Debt

If you are a creditor in a bankruptcy case listed on the Statement of Affairs you will be contacted prior to a dividend being paid and asked to complete a Proof of Debt Form. The notice to prove debts is also advertised in a national newspaper and in Iris Oifigiúil in advance of a dividend being paid.

All debts for inclusion in the bankruptcy dividend payment process must be proven by filling in the Proof of Debt form. This form should only to submitted when requested to do so.

Legislation

The main provisions of bankruptcy law are contained in the following Acts:

• Bankruptcy Act, 1988,
• Bankruptcy (Amendment) Act 2015 No 60 of 2015
• Civil Law (Miscellaneous Provisions) Act 2011
• Personal Insolvency Act 2012 (part 4)(Commencement) Order 2013
• Courts and Civil Law (Miscellaneous Provisions) Act 2013 (Part 7)(Commencement) Order 2013
• Rules of the Superior Courts (Order 76 and Appendix O)
• European Union Insolvency Regulation (implemented in Ireland by S.I. 334 of 2002)
• Supreme Court and High Court (FEES) Order 2014

How does a creditor make a debtor bankrupt?

The High Court can make a debtor bankrupt at the request of a creditor. This request is made in a document called a petition (this is a sworn document which sets out the nature of your debts and promises that you will do various things such as attend the court hearing, advertise the court sitting and pay any fees or expenses of the Official Assignee). This must be filed in the Office of the Examiner of the High Court.

When the petition is filed, the petitioning creditor undertakes to the court to advertise notice of the bankruptcy in the Iris Oifigiúil and a national daily newspaper*. The petitioner must also lodge €200 towards the costs and outlays of the bankruptcy with the Bankruptcy Division of the ISI and give an undertaking to the Official Assignee to cover any further costs and outlays which may be incurred.

Grounds for petition

A creditor may petition for bankruptcy against a debtor where the debtor has committed an act of bankruptcy within the previous three months. The most common acts of bankruptcy relied upon by a creditor are:

• failure by the debtor to comply with a bankruptcy summons requesting payment of a specific sum due, within fourteen days from service of the summons on the debtor; and
• the making of a return of no goods in respect of the debtor by the sheriff or county registrar (the return made by a sheriff to an order which authorises him to seize the goods of a person) when he has been unable to find any goods to seize.

The Personal Insolvency Act 2012 has introduced a number of additional ‘acts of bankruptcy’. These are:

• where the debtor has been subject to a Debt Settlement Arrangement which has been terminated or which is deemed to have failed,
• where the debtor has been subject to a Personal Insolvency Arrangement which has been terminated or which has failed.

Petition requirements

For a creditor to be entitled to petition the court to make a debtor bankrupt, a number of conditions must be met. These include:

• the petition must be presented within three months of the act of bankruptcy;
• the amount of debt owed must be set out in an affidavit (this is a written, signed and sworn statement which allows a person to formally affirm something to be true before a person that is authorised to witness them such as a practicing solicitor, Commissioner for Oaths or an officer of the Court);
• the debt owed must be at least €20,000.

The debtor must be either resident in the State or within three years prior to presentation of the petition, have ordinarily resided, had a dwelling house or place of business, or carried on business within the State.

The creditor's petition must state whether any security (for example, a mortgage or a charge) is held by them in respect of the debt. If so, the creditor must indicate whether he/she intends to give up the security for the benefit of other creditors or put a value on their security.

Court

When the Court considers the creditor’s petition, it will have regard to the debtor’s assets and liabilities and will consider whether the debtor’s inability to pay his/her debts could be more appropriately dealt with by a Debt Settlement Arrangement or a Personal Insolvency Arrangement.

Where the Court considers either of these alternatives to be more appropriate, it may adjourn the hearing of the petition to allow the debtor the chance to enter one of these alternative arrangements.

• The Companies (Miscellaneous Provisions) Act 2013 contains a provision which provides an alternative to the requirement to advertise details of a petition for bankruptcy in a national newspaper. The provision provides for a person to publish details of the bankruptcy on the ISI website, at no cost.

Remittance of Credit Balances

Financial Institutions have a responsibility under Legislation to disclose details of all accounts a bankrupt holds with them. If a bankrupt holds a credit balance in any account on the date of adjudication there is an immediate vesting in the Official Assignee and the Financial Institution should download the form below, complete and return to the Bankruptcy Division of the Insolvency Service of Ireland. This form also includes account details for remitting the amount to the Insolvency Service.