GARDAI and teachers are among the biggest group of debtors enquiring about bankruptcy, despite the adverse impact on their careers of going bust.
Mid- and lower-tier bank officials are also seeking advice on their insolvency options, up to and including bankruptcy, as Ireland’s new debt regime begins to take effect.
Last year, a new insolvency law came into effect, offering a range of possible debt deals for over-indebted borrowers. Bankruptcy fees were also slashed and the discharge period reduced from 12 to three years, paving the way for more bankruptcies.
But many debtors cannot reach deals with their banks or do not meet the minimum income guidelines set down by the Insolvency Service of Ireland, triggering a new wave of bankruptcies.
Yesterday the High Court recorded its highest ever single day of bankruptcies – with one person adjudicated a bankrupt every three minutes during the first half-hour.
Eleven people, including a married couple and a brother and sister who ran a restaurant, were among those who successfully applied to become bankrupts.
Last night David Hall of the Irish Mortgage Holders’ Association (IMHO), who addressed a number of garda associations last year about the new insolvency regime, said gardai – including senior officers such as inspectors and sergeants – were enquiring about bankruptcy in “significant numbers”.
Mr Hall said that St Raphael’s and St Paul’s, the two garda credit unions based in Dublin and Cork, were active in pursuing debtors in the courts at a time when gardai were struggling with lower rates of pay, overtime and allowances.
“Everything is lower,” said Mr Hall, who warned that bankruptcy would become an option “of first resort” for debtors who could not afford to make arrangements with their creditors because of the sheer scale of their debts or lack of available income.
The Garda Representative Association (GRA) said there had been a “widespread fear for some considerable time” among gardai about the consequences of being declared insolvent.
The Garda Benevolent Trust Fund, which last year paid out more than €600,000 to garda families, including financial hardship grants, has also recruited a debt specialist to advise gardai in financial difficulty.
“The fear, as in previous times, is that if a member is in difficulty, it immediately sparks an investigation under the garda code,” said a GRA spokesperson.
Last night, cross-border insolvency lawyer Catherine Allison said that teachers were among the biggest category of borrowers inquiring about self-made bankruptcy.
She said that people were opting for bankruptcy because they had no money available for new insolvency arrangements and because many banks were not acting reasonably in negotiations or writing down debts to market value.
“If you don’t have money, you can’t do insolvency,” said the Dundalk-based solicitor.
Almost all of the bankruptcies granted yesterday were brought by debtors rather than creditors as is the normal course in bankruptcy cases.
One debtor was adjudicated a bankrupt because a personal insolvency practitioner (PIP) said it was “the only option” as the debtor was living below the income guidelines devised by the Insolvency Service of Ireland.
High Court judge Mr Justice Brian McGovern raised concerns about the level of engagement debtors had with their banks before becoming self-adjudicated bankrupts.
He also raised concerns about debtors ability to self-apply under the new procedures – with several debtors failing to file their forms, including statement of affairs, correctly.
“We are entering new territory with these (bankruptcy) applications,” said Judge McGovern who repeatedly asked if reasonable steps had been taken to make arrangements with creditors.
“I’m not going to adjudicate as long as reasonable steps are being made,” the judge told one woman whose husband is facing bankruptcy arising out of his failure to pay more than €8,000 to a legal firm.
The man has already paid €20,000 to the firm – his wife’s life savings – but is struggling to repay the outstanding balance of just over €8,000.