Effects of Bankruptcy
Employment and Bankruptcy
A bankrupt person in Ireland may continue in their current employment or seek new employment while they are bankrupt. However there are some limits on the nature of the allowable type of employment.
The Companies Act 1963, as amended, makes it an offence for a bankrupt person to act in various capacities in relation to a company without the consent of the court. These include acting as a director, auditor, manager, liquidator or receiver of a company. Bankrupt persons are also not entitled to hold elected representative office in local authorities, in the Dail or in the Seanad. Certain professions may be governed by regulatory bodies where members’ personal finances are subject to regulatory requirements. These bodies may impose sanctions on members who become bankrupt including the sanction of expulsion from the regulatory body, thus making it difficult or impossible to practice the relevant profession.
Income and Bankruptcy
When you become bankrupt in Ireland, the Official Assignee will seek to obtain a contribution from your net income, after applying the ISI Guidelines on Reasonable Living Expenses. These guidelines take the bankrupt person’s family situation into account when calculating how much of their surplus income can be paid to the Official Assignee.
The High Court may also have regard to the ISI Guidelines in determining what, if any contribution it may direct the bankrupt person to pay. Typically, an Income Payment Order is made and it can last for up to five years from when it is agreed. So even if a bankrupt person is discharged from bankruptcy in three years, they may still have to make contributions from their income to the Official Assignee for a further number of years, depending on when the Income Payments Order was made and the length of the term which the court ordered, during which the payments would have to be made. In regard to Social Welfare payments it is not the practice for these to be taken by the Official Assignee or by the Court.
Trading and Bankruptcy
A bankrupt person can trade while bankrupt provided they trade in the same name as they were using when they were made bankrupt. If a bankrupt person trades in a name other than that in which they were made bankrupt without disclosing this name, they are guilty of an offence. The bankrupt person must notify the Official Assignee of any business or trade in which they engage. If a partner in a business partnership is adjudicated bankrupt, the partnership is automatically dissolved unless the partnership agreement provides otherwise. The partnership assets are first used to pay partnership debts and any remaining surplus can be used to pay an individual’s debts.
Pensions and Bankruptcy
Generally a bankrupt’s pension assets are not transferred to the Official Assignee but a bankrupt’s receivable pension income is treated as income for the purposes of the bankruptcy. However, certain types of pension funds may be included in the bankruptcy estate for realization and payment to creditors. These funds include Approved Retirement Fund (ARF) and Vested Personal Retirement Savings Account (Vested PRSA).
If, in the three years prior to being adjudicated bankrupt, the bankrupt person made excessive contributions to a pension scheme, the Official Assignee may apply to court for an order to make the excessive amount available for distribution to creditors. If the bankrupt person has a pension entitlement that matures within five years from the date of the bankruptcy order, the Official Assignee has the right to claim it for the benefit of creditors.
Article written by: Paddy Byrne