What does it mean to be bankrupt?

godtabh

You see a lot of high profile people being declared bankrupt lately and I noticed something in my employment contract that states it will be terminated if I am declared bankrupt.

So what does it mean for a normal person to be declared bankrupt? What are the day to day implications of it and why would it affect my employment?

Hogzy

IMO the general definition would be where one in unable to pay their debts as they fall due, or their assets is worth less than their debt (that they are unable to pay off)

This is just off the top of my head.

godtabh

Hogzy wrote: »

IMO the general definition would be where one in unable to pay their debts as they fall due, or their assets is worth less than their debt (that they are unable to pay off)

This is just off the top of my head.

I understand the concept (as above) but I'm more concerned about the day to day implications

Kosseegan

godtabh wrote: »

You see a lot of high profile people being declared bankrupt lately and I noticed something in my employment contract that states it will be terminated if I am declared bankrupt.

So what does it mean for a normal person to be declared bankrupt? What are the day to day implications of it and why would it affect my employment?

If a person is declared bankrupt all of their assets vest in the official assignee. All of their income goes to the official assignee who allows them living expenses. All other money goes to pay the creditors. Credit cannot be obtained for more than €500 without informing the other party to the transaction. Effectively no credit can be obtained.
Traditionally there was a view that individuals who ran up debts they couldn't pay were thieves. There was also a fear that they would be tempted to embezzle from their employer. It is unlikely that a clause in an employment contract terminating the employment in the event of bankruptcy would be compatible with the ECHR.

godtabh

Very interesting.

I assume assets are things like cars, houses, savings etc? Generally cars, houses etc would have security based loan ie you don't pay they can be repossessed? If you get to the bankrupt stage what else is left to reposes?

Ken.

godtabh wrote: »

Very interesting.

I assume assets are things like cars, houses, savings etc? Generally cars, houses etc would have security based loan ie you don't pay they can be repossessed? If you get to the bankrupt stage what else is left to reposes?

Anything in the house that belongs to the bankrupted person. T.v.,computer,etc. As far as i'm aware they cannot take stuff like clothes.

Hogzy

godtabh wrote: »

Very interesting.

I assume assets are things like cars, houses, savings etc? Generally cars, houses etc would have security based loan ie you don't pay they can be repossessed? If you get to the bankrupt stage what else is left to reposes?

Houses yes, But a home wouldnt be unless it was security for a loan (Family Home Protection Act)

godtabh

So a family home (and it's contents?) would be protected?

If I was to go bankrupt tomorrow what would happen? My assets (solely in my name) would include an aparment + contents and car. The remainder would either be jointly owned with my wife (contnets of family home) or soley in her name ie the family home which she bought before getting married.

The situation above I can see occurring a lot in the future. What happens here? Do reasonable expenses mean looking after your day to day family expenses (hard to do at the best of times!)?

godtabh

PS maybe I should add I won't be going bankrupt tomorrow and touch wood would not likely to do it

Hogzy

godtabh wrote: »

So a family home (and it's contents?) would be protected?

That is obviously not the case if your home has a mortgage. Or is security for a loan.

If I was to go bankrupt tomorrow what would happen?

How long is a piece of string? It not a matter of waking up in the morning and deciding to state yourself as being a bankrupt. You will usually be declared bankrupt by a court when your creditors sue you.

My assets (solely in my name) would include an aparment + contents and car. The remainder would either be jointly owned with my wife (contnets of family home) or soley in her name ie the family home which she bought before getting married.

The situation above I can see occurring a lot in the future. What happens here? Do reasonable expenses mean looking after your day to day family expenses (hard to do at the best of times!)?

If someone is declared bankrupt then their creditors can sue them for the debt. A court can order the bankrupt to liquidate their assets so as to help pay off their debt.

Kosseegan

Hogzy wrote: »

That is obviously not the case if your home has a mortgage. Or is security for a loan.


How long is a piece of string? It not a matter of waking up in the morning and deciding to state yourself as being a bankrupt. You will usually be declared bankrupt by a court when your creditors sue you.



If someone is declared bankrupt then their creditors can sue them for the debt. A court can order the bankrupt to liquidate their assets so as to help pay off their debt.

A bankrupt cannot be sued for a debt, at least not without the leave of the court. The creditor can do nothing to a bankrupt other than wait for the official assignee to give them money. Some people apply to have themselves declared bankrupt for that very reason. That is why people are going to the UK and applying for bankruptcy. Therbankrupt does not liquidate his assets. They are automatically transferred to the official assignee who can and will liquidate them. Secured creduitiors will be paid out of the assets over which they have a charge. Other creditors have to hope there is something left over.

Hogzy

Kosseegan wrote: »

A bankrupt cannot be sued for a debt, at least not without the leave of the court. The creditor can do nothing to a bankrupt other than wait for the official assignee to give them money. Some people apply to have themselves declared bankrupt for that very reason. That is why people are going to the UK and applying for bankruptcy. Therbankrupt does not liquidate his assets. They are automatically transferred to the official assignee who can and will liquidate them. Secured creduitiors will be paid out of the assets over which they have a charge. Other creditors have to hope there is something left over.

I stand corrected

jblack

Kosseegan wrote: »

It is unlikely that a clause in an employment contract terminating the employment in the event of bankruptcy would be compatible with the ECHR.

I'm slightly off point here Kossegan - I have never considered this but presumably provisions in professional bodies' charters that allow for strike off in the event of a member becoming bankrupt will fall foul of ECHR...

Interesting, thank you.

krd

jblack wrote: »

I'm slightly off point here Kossegan - I have never considered this but presumably provisions in professional bodies' charters that allow for strike off in the event of a member becoming bankrupt will fall foul of ECHR...

Interesting, thank you.

TDs are not allowed hold onto their seats if they're declared bankrupt.

Milk & Honey

krd wrote: »

TDs are not allowed hold onto their seats if they're declared bankrupt.

That was the subject of a proposed constitutional challenge by Beverley Flynn a few years ago. She didn't become bankrupt so the case never went ahead.

gigawatt2007

This has changed slightly with the introduction of the insolvency bill.

When declared bankrupt you can hold on to €6k worth of personal assets to ensure a 'reasonable standard of living'.