Bankruptcy delay 'could leave State open to being sued'
THE State has left itself open to being sued by heavily-indebted consumers as it is unable to process bankruptcy applications at the moment, a leading insolvency lawyer said.
A staff shortage means no applications for bankruptcy are being accepted at the moment.
Those applying to be declared bankrupt have to submit completed forms to what is called the examiner's office, which forms part of the Courts Service.
But debt advisers have been told by the examiner's office it is unable to process bankruptcy applications at present.
The examiner's office accepts applications for bankruptcy, reviews the documents submitted and then gets back to those seeking to be declared bankrupt with a court date if the documents are in order.
Bill Holohan, senior partner of Holohan Law Solicitors in Cork and Dublin, said the failure to process applications would mean those seeking to make themselves bankrupt would have their rights to seek protection from their creditors violated.
He said the failure of the examiner's office to process applications could be seen as an unconstitutional violation of rights of access to the courts, for those seeking to be declared bankrupt.
If this was found to be the case then the insolvent debtor could have a right to bring an action for damages against the State, Mr Holohan said.
"Even if that action were taken after the debtor were made a bankrupt, as any compensation would be compensation for violation of personal rights and not something related to their property rights."
Mr Holohan said all property and all rights are transferred on bankruptcy to the official assignee in bankruptcy, but the debtor/bankrupt could be entitled to keep the proceeds of the claim and the creditors could get nothing from the claim.
He asked: "Is this the new army deafness claims scenario lurking in the legal undergrowth?"
A spokesman for the Courts Service said the public service recruitment embargo meant it has experienced an almost 17pc reduction in staff numbers during the recession.
It had attempted to streamline services, the spokesman said. But despite this a backlog of bankruptcy applications had built up.
"The situation is short term, and we will look in the coming weeks at providing a solution to it.
"We are already currently allocating some staff across the service. We are also hopeful that we might receive extra resources for staff in the upcoming budget," the Courts Service spokesman said.
He added that recent changes in company legislation also means certain areas of the work of the examiner's office has started to decrease, and will reduce dramatically in the coming months and years.
There was a similar temporary shutdown in the processing of new bankruptcy applications in March.
Last year 448 people became bankrupt, up from 67 the previous year.
Demand for bankruptcy services could rise much more if the Government takes on board recommendations from the Oireachtas Committee on Justice to reduce the bankruptcy from its current three-year term to just one year.