Seven-year bankruptcy rule never existed

Your editorial of December 10 headlined 'Banks and bankruptcy' contains an error.

Contrary to what you say, before the changes to the bankruptcy legislation in 1998 to provide for the 'Automatic Discharge' of a bankrupt from bankruptcy after four years, there was never a seven-year period after which a bankrupt was discharged from bankruptcy. Rather, an application had to be made to the court for a discharge and this involved satisfying a number of stiff legal requirements. As a consequence, it was rare for individuals to obtain a discharge from the court, and in fact the vast majority remained under the disability of bankruptcy for the rest of their lives.

The Law Reform Commission in its report on bankruptcy in 1995 believed this state of affairs was unacceptable. It recommended the introduction of a three-year period for the duration of a bankruptcy before an automatic discharge took effect. The purpose underlying the recommendation was twofold: to provide for the financial rehabilitation of an individual within a reasonable period of time; and to encourage individuals to co-operate with the Trustee in Bankruptcy.

The administration accepted the recommendation but during the passage of the draft legislation before the Bills Committee of the Legislative Council, the period was increased to four years.

EAMONN O'CONNELL

Official Receiver