Going Bust – Ireland versus UK

Irish Bankruptcy – Background

-          Up until recently, there have been relatively few bankruptcies in Ireland (as few as 8 in 2008) -          Bankruptcy is a complex issue-debtors/creditors should be wary of one-dimensional advice which may not best serve their interests -          The Irish Government has proposed new legislation for the Irish bankruptcy regime aiming to overhaul the system -          One of the proposed amendments is the proposal for Personal Insolvency Arrangement (PIA) -          A PIA would effectively allow for an individual to enter into a scheme of arrangement with their creditors and would allow an element of debt forgiveness -          The PIA is modelled on UK’s Individual Voluntary Arrangement (IVA) system  

Key elements of proposed Irish PIA system

-          Reduced reliance on court system in turn should reducing costly solicitors and barrister fees -          Assets can be disposed of in an orderly sale without going through bankruptcy and so in theory the assets should realise more. In turn Creditors are likely to receive a larger settlement than if the sale was distressed  

Notes re the UK Individual Voluntary Arrangements

-          The UK have a tried and tested system of IVA’s  (circa 5,000 IVA’s per annum) -          This enables Debtors to deal with Creditors on low cost basis -          If an IVA is unsuccessful then the individual is placed into bankruptcy -          The success of the system is based on the fact that creditors receive more money than they would under bankruptcy  

UK v Irish Bankruptcy

-          Whilst some may view UK Bankruptcy as a soft option the reality is that a debtor will lose all assets under both regimes (albeit that the UK system provides for an exit from bankruptcy within 1yr as opposed the 3yrs proposed  under the new Irish legislation)

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