Bankruptcy legislation in Ireland 'is complex and it can be daunting for an individual bankrupt, in particular where property, including a family home, may be sold,' according to Ms Justice Elizabeth Dunne. 'It can be difficult for creditors who are owed, at times, significant amount of funds'

Bankruptcy is extremely rare in Ireland but anecdotal evidence suggests that more and more cases are being taken in the High Court against individual developers, rather than their companies, increasing the possibility that a creditor will have them declared bankrupt.

As a result, some developers are understood to have changed their addresses to overseas locations in recent weeks. One of those who did told the Sunday Tribune it was done in an effort to make it more difficult to be served with summonses. Insolvency experts, however, are understood to be worried that it might be done because in the North and in England, a bankruptcy can end after 12 months compared to 12 years or more for an undischarged bankrupt in this country.

Ms Justice Elizabeth Dunne wrote that the legislation surrounding bankruptcy in Ireland "is complex and it can be daunting for an individual bankrupt, in particular where property, including a family home, may be sold. It can be difficult for creditors who are owed, at times, significant amount of funds".

If somebody is declared bankrupt, either by a creditor or at their own request, an official assignee is appointed by the High Court to administer the bankruptcy. The property and other assets are sold and then the costs, expenses, court fees and certain priority debts are paid. Only then are the remaining proceeds distributed to the creditors.

As a result many creditors prefer to come to a scheme of arrangement with a debtor as they risk not being paid anything. With the economic downturn however, increasingly bitter disputes are breaking out and some creditors don't seem concerned about the fact they might not receive anything from the sale of the bankrupt's assets.

If somebody is made bankrupt their name is published in one national and one local newspaper. They must tell the official assignee if they change address and must also file a statement of affairs setting out their assets and all amounts owed. Any property acquired since the date of the bankruptcy order must be disclosed to the assignee and failure to co-operate can lead to a High Court appearance.

All property held by the bankrupt automatically vests in the official assignee for the benefit of creditors; this typically includes overseas property. The family home may be sold, although the family is typically allowed to remain in it, even though the children must leave either at 18 or when they finish their education. If it is jointly owned, then the joint ownership is split. If a bankrupt has a stake in a partnership, then it is dissolved unless the terms of the partnership provide for it to continue.

The bankrupt's salary and pension may be appropriated by the court for their creditors and they cannot obtain credit of more than €650 without disclosing that they are a bankrupt.

They are allowed to trade in their own name but the assignee must be informed and they are not allowed to act as a TD or senator, or as a director, auditor, manager, liquidator or receiver of a company. If they want to travel abroad they have to inform the assignee and they could be arrested if "it appears to the High Court that they may be leaving the state in order to avoid the consequences of bankruptcy".

In the case of developers, the banks thought they would be protected by personal guarantees if a developer's business failed but it's becoming clear that that is not the case.

The government has been clear that the homes of developers should be seized if they pledged them as part of a personal guarantee, and banks have always said they insisted on the family home as part of the guarantee. So can we expect to see developers' houses being put up for sale? No, according to one major developer who said he has always excluded his family home from those personal guarantees.

"The personal guarantee would have been for all of the assets except that. Since the late 1990s we would always have done that," he said.

In the case of Anglo Irish Bank, he said, for a €100m site it would have lent more than the normal 65% to a large client because it already had a charge over the client's investment-producing assets. Therefore it was willing to lend 100% of the money, plus the stamp duty, plus two years interest-free roll-up and the planning application fees.

"Their view was that a large developer had so many assets they could pay it back by selling the investment properties," he said. The problem is those investments have now slumped in value.

He believes Nama is being naive when it comes to the good assets that it is planning to include in the bond.

"If a building was worth €100m in the boom, the annual rent from it would be about €4m. The developer would have borrowed about 75%-80% of the building's worth but its value has now fallen to €50m. All the good loans aren't good loans because the banks have overlent on the investment properties... The personal guarantees are clearly worthless."

The Courts Service has published a detailed guide to bankruptcy, available at