Bankrupts to be allowed take interest in homes after 3 years

People who apply for bankruptcy will be allowed take ownership or interest in their family home after three years, under new laws.

The overhaul of the bankruptcy rules will reduce the number of years that people stay in bankruptcy from three to one.

The measures have been widely welcomed amid suggestions the radical changes may force banks to do deals with borrowers in debt or their assets will be sold at rock-bottom prices.

The Government hopes the laws will be enacted before the end of the year.

But opposition politicians warned that the new rules must be monitored carefully to ensure Ireland does not become the “bankruptcy tourism capital of Europe”.

Justice Minister Frances Fitzgerald brought the long-awaited bill through the Dáil, saying it would particularly help small businesses.

“The measures in this bill will give people in serious debt, who have no disposable income, an earlier return to normal economic activity.”

The bill brings Ireland into line with bankruptcy terms in the North and in Britain.

However, any applicant found to be hiding assets under the terms will be declared bankrupt for 15 years.

Previous data on people who declare bankruptcy has shown that some 75% end up losing the family home. They also lose bank accounts and are barred from seeking credit in excess of €600. They may also lose their job due to their status and be disbarred from seeking certain forms of employment. An applicant is also banned from becoming a company director.

The legislation provides that bankrupt applicants can regain financial ownership of a home after three years, under new rules, if it is transferred to a spouse or relative in the meantime.

Other rules also provide that the assignee who handles the bankruptcy application can refuse to take a property off an applicant, if property charges or other costs are attached to it.

Fianna Fáil justice spokesman Niall Collins warned protections were needed.

“We hope there are enough protections in the bill to prevent abuse by rogue business people. We have to learn from the past when some individuals got away scott free with reckless activity.”

There were concerns that Ireland could be viewed as “the bankruptcy tourism capital of Europe”, said the Limerick TD, and that the Insolvency Service of Ireland would not have adequate resources to handle the extra work. “However, if the Irish courts were to adopt the same robust approach as in Northern Ireland, Dublin would not be as attractive to Europeans seeking bankruptcy,” he added.

Fine Gael’s David Stanton, head of the Oireachtas justice committee, welcomed the new rules: “We are moving away from bankruptcy being seen as a thing of shame. In the US, people try and fail and then try again. Others say at least the person tried, had a go, is back again and is benefitting his or her family, himself or herself and the economy and perhaps is employing people as well.”

Tánaiste Joan Burton praised her party TD Willie Penrose, who spearheaded the reforms . Speaking at Labour’s Longford-Westmeath election selection convention, where Mr Penrose was chosen to run for the party, she said last night: “His vital contribution will reduce the ordeal for people facing bankruptcy and allow them to start over sooner, which is better for individuals, the economy and society.”