MORE THAN twice as many people were declared bankrupt in 2009 as in 2008, and the 2008 figure has already been reached this year.
There were 17 bankruptcies and seven “arranging debtors” in 2009, compared with eight bankruptcies and one “arranging debtor” in 2008.
Between January and April 16th this year eight people were declared bankrupt, and five entered court-supervised arrangements for the payment of their creditors.
Bankruptcy is a relatively rare phenomenon in Ireland, with the number of people becoming bankrupt remaining in single figures each year for the past decade. There were only four in 2007, nine in both 2006 and 2005 and five in 2004 and 2003.
Companies in difficulties with their creditors face liquidation or “winding up”, while an individual who cannot pay his or her debts can be declared bankrupt, either at his own request (voluntarily) or that of a creditor (involuntarily), by the High Court.
There are two ways of entering bankruptcy – at the request of the debtor himself seeking protection from his creditors (which is rare) or at the petition of a creditor, who asks the court to take over the assets of the debtor and arrange for the payment of his debts.
A person who becomes bankrupt has all his or her property taken into the control of the Official Assignee, who has the task of distributing the assets among the debtors, according to a hierarchy of preference. The Revenue Commissioners, for example, are preferential creditors.
The High Court regards bankruptcy as a last resort, and since the coming into force of the new Bankruptcy Act in 1989 it developed a practice whereby a creditor had first to obtain a court judgment against a debtor, sought to have it enforced against the debtor’s assets by a sheriff, and received a declaration of nulla bona (“no goods”) from the sheriff, before proceeding with a bankruptcy petition.
This, combined with rules of procedure requiring bankruptcy proceedings to be heard in public, reduced the number of bankruptcies from earlier years.
In February 2009, the Supreme Court ruled that requiring a nulla bona return from the sheriff was inconsistent with the Bankruptcy Act. This may have contributed to the increase in bankruptcies in 2009.
However, the increase in bankruptcy actions over the past 15 months mirrors the increase in the volume of work being heard in the Commercial Court, and particularly the increase in the number of liquidations.