Thousands to enter bankruptcy as overall cost cut in half
THE cost of going bankrupt is to be cut in half.
The move is expected to see thousands of people with crippling debts declaring themselves bankrupt in a bid to deal with their borrowings.
It comes as the first insolvency case involving mortgage debts has come before the courts.
Now the Government is set to move in the coming days to change the bankruptcy term from 12 years to three years.
The change will be retrospective, which will mean high-profile business people already declared bankrupt, such as former cement and insurance billionaire Sean Quinn and former Anglo Irish boss Sean FitzPatrick, are expected to benefit from the shorter discharge period. And the developer behind the controversial Priory Hall complex, Tom McFeely, will also benefit from the new shorter bankruptcy period.
Dublin-based solicitor and insolvency expert Anthony Joyce said: "Anyone who is already bankrupt will have their period of discharge reduced to three years and six months from the date that the new regime comes in."
With bankruptcy, all debts are wiped out. There are some complications around homes. In most cases, people are expected to keep their homes, even though a small sum may need to be paid for the home by a wife or husband of the person being made bankrupt.
The Government will also make it cheaper to declare bankruptcy as an option to deal with debts.
The fees to be paid to state officials and the stamp duty for entering bankruptcy will be the same but the overall cost will be cut from €1,450 to €750.
The development has emerged following the dropping of a requirement that details of a bankruptcy be published in a national newspaper.
Instead, the details will only need to appear on the website of the Insolvency Service of Ireland, and in 'Iris Oifigiuil' -- the official state gazette.
It costs between €2,000 and €6,000 to have a solicitor process a bankruptcy application in the courts, but a number of bodies are preparing to do this work for free. These include the Irish Mortgage Holders' Organisation, New Beginning, Flac (Free Legal Advice Centres) and the Phoenix Project.
Up to 5,000 people are expected to declare themselves bankrupt next year after the discharge term has been reduced from 12 to three years.
However, the new legislation is expected to include a clause to require the bankrupt to pay a contribution from their income for five years in certain circumstances.
The new legislation will also increase the level of debt required to make a person bankrupt. A debtor must owe a creditor €20,000 under the new system before he or she can be forced into bankruptcy or make a petition to declare themselves bankrupt, compared with €1,900.
Meanwhile, the first insolvency case involving a family with mortgage borrowings has come before the courts.
The case of the Leinster-based family with over €600,000 of borrowings came before Trim Circuit Court last week, according to RTE.
Until now, insolvency cases involving mortgage debt have not been heard before the courts. This is the first case of its kind -- coming under the new system established to tackle the country's personal debt crisis.
The outcome of the case will be closely looked at as borrowers in similar situations will be looking to see what kind of deal can now be achieved.