If and when the new Irish government – widely expected to be a coalition of the Fine Gael and Labour parties – decides to reform the Bankruptcy Act 1988, one of the key matters to consider is what the appropriate level of debt should be to ground a creditor’s petition for bankruptcy.As the law stands at present a creditor may present a petition to adjudicate a debtor bankrupt in Ireland where, inter alia, the liquidated sum owing to the creditor amounts to at least Euro 1,900. In an appendix to the Personal Debt Management and Debt Enforcement report published in December 2010 by the Law Reform Commission (LRC) of Ireland, one of the recommended amendments to the Bankruptcy Act 1988 was that the minimum debt level be Euro 50,000 for a creditor to bring a petition of bankruptcy.
The LRC considered many factors before making this recommendation including the law and practice in various other jurisdictions. Two other primary considerations were the cost of the bankruptcy process in Ireland, particularly Irish legal costs and the (long term and serious) impact of bankruptcy proceedings on the debtor.
Interestingly, the (proposed) threshold is for a single creditor and not for the total debts of the (allegedly) insolvent person. It also raises questions as to whether two or more creditors could merge debts to get above the threshold. For example if each of two creditors were owed Euro 30,000, could one creditor sell the debt to the other so as to bring the indebtedness to one creditor above the (proposed) necessary threshold of Euro 50,000?
This recommendation is just one of thirteen specific recommendations (provisions) relating to bankruptcy made by the LRC in an appendix to the report. The (likely) new incoming Fine Gael and Labour administration will have to meet many legislative challenges and reform of the Bankruptcy Act 1988 should feature high on their priority list. They cannot do any worse that the previous Fianna Fail Greens administration did in reforming the personal insolvency laws.
Paddy Byrne 26 January 2011