Avoid Bankruptcy, Avoid Insolvency – Cork Solicitor

Avoid Bankruptcy, Avoid Insolvency – Cork Solicitor

Compositions with Creditors

Sections 87-109 of the 1988 Bankruptcy Act provide an insolvent debtor who has not been adjudicated bankrupt with an opportunity to compromise under the arrangement procedure and so reach a debt settlement while avoiding a declaration of bankruptcy.

Under this procedure, a debtor who is unable to meet his or her obligations may apply for the protection of the court with a view to making a proposal to his or her creditors for the composition of the debts owed to him or her.

The debtor must set out to the Court the reasons for the inability to pay his debts and request that his or her person and property be protected from any action or other process, including the registration of a judgment mortgage.

If an order for protection is granted, the Court shall direct the debtor to call a preliminary meeting of creditors to state his or her financial affairs, after which a private sitting of the Court will take place to consider the debtor‘s proposal for composition and to examine under oath the debtor and any creditors. Creditors are also given the opportunity to prove their debts at this sitting.

A statement of the debtor‘s affairs and payment capacity as well as any proposal made at the preliminary creditors‘ meeting must also be furnished to the Official Assignee in advance of this private sitting.

If 60% of the creditors in number and value voting at the private sitting approve the proposal, it shall be deemed to be accepted by the creditors, and becomes binding on the debtor and all creditors on approval by the Court. The proposal may provide for the realisation of property of the debtor or the use of the debtor‘s property as security, in which case all or part of the debtor‘s property vests in the Official Assignee as in the formal bankruptcy procedure. The Official Assignee presents to the Court a list of creditors, an account of the debtor‘s finances, details of expenses and fees, the amount of dividends payable to creditors and a report on the realisation of the debtor‘s estate.

The Court makes such order as it thinks fit for the distribution of the whole or part of the estate to pay expenses and fees, preferential payments and the creditors ‘dividends.

Where the debtor‘s proposal has been carried into effect, the Court, on receipt of a report from the Official Assignee, shall grant a certificate to the debtor which serves to discharge the debtor from the claims of all creditors who received notice of the arrangement.

Importantly section 99 provides that the affairs of the arranging debtor and the arrangement proceedings are not to be published without the sanction of the Court except for the publication in a trade journal of the debtor‘s name, address, assets and liabilities as have been provided to the Official Assignee at the commencement of the arrangement procedure.

Sections 87-109 of the 1988 Bankruptcy Act provide an insolvent debtor who has not been adjudicated bankrupt with an opportunity to compromise under the arrangement procedure and so reach a debt settlement while avoiding a declaration of bankruptcy. Under this procedure, a debtor who is unable to meet his or her obligations may apply for the protection of the court with a view to making a proposal to his or her creditors for the composition of the debts owed to him or her.

The debtor must set out to the Court the reasons for the inability to pay his debts and request that his or her person and property be protected from any action or other process, including the registration of a judgment mortgage.

If an order for protection is granted, the Court shall direct the debtor to call a preliminary meeting of creditors to state his or her financial affairs, after which a private sitting of the Court will take place to consider the debtor‘s proposal for composition and to examine under oath the debtor and any creditors. Creditors are also given the opportunity to prove their debts at this sitting.

A statement of the debtor‘s affairs and payment capacity as well as any proposal made at the preliminary creditors‘ meeting must also be furnished to the Official Assignee in advance of this private sitting.

If 60% of the creditors in number and value voting at the private sitting approve the proposal, it shall be deemed to be accepted by the creditors, and becomes binding on the debtor and all creditors on approval by the Court. The proposal may provide for the realisation of property of the debtor or the use of the debtor‘s property as security, in which case all or part of the debtor‘s property vests in the Official Assignee as in the formal bankruptcy procedure. The Official Assignee presents to the Court a list of creditors, an account of the debtor‘s finances, details of expenses and fees, the amount of dividends payable to creditors and a report on the realisation of the debtor‘s estate.

The Court makes such order as it thinks fit for the distribution of the whole or part of the estate to pay expenses and fees, preferential payments and the creditors ‘dividends.

Where the debtor‘s proposal has been carried into effect, the Court, on receipt of a report from the Official Assignee, shall grant a certificate to the debtor which serves to discharge the debtor from the claims of all creditors who received notice of the arrangement.

Importantly section 99 provides that the affairs of the arranging debtor and the arrangement proceedings are not to be published without the sanction of the Court except for the publication in a trade journal of the debtor‘s name, address, assets and liabilities as have been provided to the Official Assignee at the commencement of the arrangement procedure.Speak to an expert today and get the best advice. Call Dan Johnson, Solicitor on 021 484 7771

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