Sean Dunne is likely to be one of the first Irish “bankrupts” to go through the new shorter version of what is still a very onerous insolvency process.
Even after their court victory in having the one-time “Baron of Ballsbridge” declared bankrupt, Ulster Bank and NAMA face an uphill task recovering the money they are owed, however.
The really big assets in Dunne’s former property empire have already been taken over by NAMA, Ulster Bank and the other lenders that fuelled his property splurge and are being managed by receivers. They include the former Jurys and Berkeley Court hotel sites in Ballsbridge for which he paid €369m at the height of the boom and part of AIB's headquarters in the same area that cost him €200m.
Luxury homes that Sean Dunne’s wife Gail Kililea controls in the US are worth nothing like those kinds of sums, for example.
So what is bankruptcy? Bankruptcy is the name for the process that kicks in when the courts decide that someone has lost the right to manage their financial affairs because of unpaid debts.
It means the courts will known appoint someone called the Official Assignee to take charge of his finances – selling anything he owns to raise money to pay off debts.
Dunne, a one-time multi-millionaire, is allowed to hold onto personal property such as clothes and household goods worth just €3,100, under Irish bankruptcy rules.
Bankruptcy means he is barred from being a TD or county council, can’t borrow more than €650 and there are restrictions on any business dealings done while the process is running.
Dunne will have to inform the Official Assignee if he is travelling outside the country or if he moves house and he must make a very detailed disclosure of all of his assets and debts.
Most European countries are happy to recognise each other's bankruptcy procedures, so there is no difficulty selling assets in one country to repay debts in another for example.
The US is slightly different but in Sean Dunne’s case a court in the US, where he now lives, has already said that it is happy to have the Irish and US insolvency processes run together – so it looks like the cross-border issues are not likely to create big problems.
In this country it takes 12 years for a person to emerge with their slate of debts wiped clean through bankruptcy. During that time a court official has almost complete control of their money and assets – including the right to take a share of any income or even any inheritance received after the bankruptcy date.
However, the rules are currently being changed to cut the bankruptcy period to three years – and anyone like Sean Dunne still going through bankruptcy when the rules change is set to benefit from the shorter period.
There is a myth that the family home is exempt from that process but in fact, as long as the courts agree, the house can be sold and the bankrupt’s share goes towards repaying their debts.
People can declare themselves bankrupt but in Ireland it is much more common for the banks and other lenders to seek to bankrupt someone who fails to repay debts – which is what has happened in the Sean Dunne case.
Now that he has been declared bankrupt the next step for Sean Dunne is to make a full disclosure of assets to the Official Assignee including a sworn “Statement of Affairs”.
Failure to comply with any of the rules can mean being hauled back in front of the courts.