Bankruptcy Act 1988

Preferential payments.

(1889, ss. 4,6; 33/1963, s. 285)

81

81. (1) In the distribution of the property of a bankrupt there shall be paid in priority to all other debts—

( a) all local rates due from the bankrupt at the date of the order of adjudication, and having become due and payable within twelve months next before that date, and all property or income tax assessed on the bankrupt up to the F64 [ 31st December ] next before the date of the order of adjudication, and not exceeding in the whole one year’s assessment;

( b) all wages or salary (whether or not earned wholly or in part by way of commission) of any clerk or servant in respect of services rendered to the bankrupt during the four months next before the date of the order of adjudication not exceeding £2,500;

( c) all wages not exceeding £2,500 of any labourer or workman (whether payable for time or for piece work) in respect of services rendered to the bankrupt during the four months next before the date of the order of adjudication: provided that, where any farm labourer has entered into a contract for the payment of a portion of his wages in a lump sum at the end of the year or other shorter term of hiring, the priority under this section shall extend to the whole of such sum, or a part thereof, as the Court may decide to be due under the contract proportionate to the time of service up to the date of the order of adjudication;

( d) all accrued holiday remuneration becoming payable to any clerk, servant, workman or labourer (or in the case of his death to any other person in his right) on the termination of his employment before or by the effect of the adjudication order;

( e) all sums due to any employee pursuant to any scheme or arrangement for the provision of payments to the employee while he is absent from employment owing to ill health;

( f) any payments due by the bankrupt pursuant to any scheme or arrangement for the provision of superannuation benefits to or in respect of employees of the bankrupt whether such payments are due in respect of the bankrupt’s contribution to that scheme or under that arrangement or in respect of such contributions payable by the employees to the bankrupt under any such scheme or arrangement which have been deducted from the wages or salaries of employees;

( g) any debt, payment or contribution which by virtue of any provision in any enactment in operation before the commencement of this Act was included in the debts to which section 4 of the Preferential Payments in Bankruptcy (Ireland) Act, 1889, gave priority; and any reference to the said section 4 in any such enactment shall be construed as a reference to this subsection.

(2) The foregoing debts shall rank equally between themselves and be paid in full unless the property of the bankrupt is insufficient to meet them, in which case they shall abate in equal proportions between themselves.

(3) Subject to the retention of such sums as may be necessary for the costs and expenses of administration or otherwise, the foregoing debts shall be discharged forthwith so far as the property of the bankrupt is sufficient to meet them.

(4) In the event of a landlord or other person distraining or having distrained on any goods or effects of the bankrupt within three months next before the date of the order of adjudication, the debts to which priority is given by this section shall be a first charge on the goods or effects so distrained on, or the proceeds of sale thereof; provided that in respect of any money paid under any such charge the landlord or other person shall have the same rights of priority as the person to whom the payment is made.

(5) Any remuneration in respect of a period of holiday or absence from work through good cause shall be deemed to be wages in respect of services rendered to the bankrupt during that period.

(6) Notwithstanding section 4 , this section shall not apply where the order of adjudication was made before the commencement of this Act, and in such a case, the provisions relating to preferential payments which would have applied if this Act had not been passed shall be deemed to remain in full force.

(7) Subsections (1), (2), (3), (5) and (6) shall apply in the case of an arranging debtor under the provisions of this Act as if he were a bankrupt, and as if the date of the filing of the petition for arrangement were substituted for the date of the order of adjudication.

(8) Any creditor who, in the case of an arrangement, votes in respect of any debt to which priority is given by this section for or against the acceptance of the debtor’s proposal or any modification thereof or, in the case of a composition after bankruptcy, votes in respect of any such debt for or against the acceptance of the bankrupt’s offer of composition or any modification thereof shall by so voting be deemed to have abandoned any rights under subsection (1) and shall be remitted to such rights (if any) in respect of any of the debts therein mentioned as such creditor would have had apart from that subsection.

(9) This section shall apply in the case of a deceased person who dies insolvent as if he were a bankrupt and as if the date of his death were substituted for the date of the order of adjudication.

(10) Nothing in this section shall alter the effect of section 3 of the Partnership Act, 1890, or shall prejudice the provisions of section 14 of the Trustee Savings Banks Act, 1863, or the provisions of the Friendly Societies Act, 1896.

Annotations:

Amendments:

F64

Substituted (3.12.2013) by Personal Insolvency Act 2012 (44/2012), s. 156, S.I. No. 462 of 2013.

Modifications (not altering text):

C22

Application of section extended (15.07.2014) by Protected Disclosures Act 2014 (14/2014), s. 12 and sch. 2 para. 5(2), S.I. No. 327 of 2014.

SCHEDULE 2

Redress for Contravention of section 12(1)

Provisions relating to winding up and bankruptcy.

5. ...

(2) There shall be included among the debts which, under section 81 of the Bankruptcy Act 1988 are, in the distribution of the property of a bankrupt or arranging debtor, to be paid in priority to all other debts, all compensation payable by virtue of a decision under paragraph 1(2)(b) or a determination under paragraph 2(1)(b) by the bankrupt or arranging debtor to an employee, and that Act shall have effect accordingly.

C23

Application of section extended (1.08.2013) by Central Bank (Supervision and Enforcement) Act 2013 (26/2013), s. 41 and sch. 5 para. 5(2), S.I. No. 287 of 2013.

SCHEDULE 5

Redress for Contravention of section 41(1)

Provisions relating to winding-up and bankruptcy

5. ...

(2) There shall be included among the debts which, under section 81 of the Bankruptcy Act 1988 are, in the distribution of the property of a bankrupt or arranging debtor, to be paid in priority to all other debts, all compensation payable by virtue of a decision under paragraph 1(2)(b) or a determination under paragraph 2(1)(b) by the bankrupt or arranging debtor, to an employee, and that Act shall have effect accordingly. Formal proof of the debts to which priority is given under this subparagraph shall not be required except in cases where it may otherwise be provided under that Act.

C24

Application of section extended (31.07.2013) by Personal Insolvency Act 2012 (44/2012), ss. 67(1), (4) and 101(1), (5) S.I. No. 285 of 2013.

Preferential debts in Debt Settlement Arrangement.

67.— (1) Unless the creditor concerned otherwise agrees in writing and provision is so made in the terms of the Debt Settlement Arrangement, a preferential debt shall, subject to subsection (3), be paid in priority by the debtor and where those debts are to be paid in priority the provisions of section 81 of the Bankruptcy Act 1988 shall apply with all necessary modifications.

...

(4) In this Chapter, “preferential debt” means a debt which, if the debtor concerned were a bankrupt would be a debt—

(a) that by virtue of section 81 of the Bankruptcy Act 1988 is to be paid in priority to all other debts, or

(b) that by virtue of any other statutory provision is to be included among such debts.

...

Preferential debts in Personal Insolvency Arrangement.

101.— (1) Unless the creditor concerned otherwise agrees in writing and provision is so made in the terms of the Personal Insolvency Arrangement, a preferential debt shall, subject to subsection (3), be paid in priority by the debtor and where those debts are to be paid in priority the provisions of section 81 of the Bankruptcy Act 1988 shall apply with all necessary modifications.

...

(5) In this Chapter, “preferential debt” means a debt which, if the debtor concerned were a bankrupt would be a debt

(a) that by virtue of section 81 of the Bankruptcy Act 1988 is to be paid in priority to all other debts, or

(b) that by virtue of any other statutory provision is to be included among such debts.

C25

Application of section extended by Industrial Relations Act 1946 (26/1946), s. 45D, as inserted (1.08.2012) by Industrial Relations (Amendment) Act 2012 (32/2012), s. 13, S.I. No. 302 of 2012.

Provisions relating to winding up and bankruptcy.

45D. ...

(3) There shall be included among the debts which, under section 81 of the Bankruptcy Act 1988 are, in the distribution of the property of a bankrupt or arranging debtor, to be paid in priority to all other debts, all compensation payable by virtue of a decision under section 45A(2)(b) or a determination under section 45B(1)(b) by the bankrupt or arranging debtor, as the case may be, to a worker, and the Bankruptcy Act 1988 shall have effect accordingly.

(4) Formal proof of the debts to which priority is given under subsection (3) shall not be required except in cases where it may otherwise be provided under the Bankruptcy Act 1988.

C26

Application of section extended (6.07.2012) by Property Services (Regulation) Act 2011 (40/2011), s. 67(5), (6) and sch. 4 para. 3(10), S.I. No. 411 of 2011.

SCHEDULE 4

Redress for Contravention of section 67(5)

Paragraphs 1 and 2: supplemental provisions

3. ...

(10) There shall be included among the debts which, under section 81 of the Bankruptcy Act 1988 are, in the distribution of the property of a bankrupt or arranging debtor, to be paid in priority to all other debts, all compensation payable by virtue of a decision under paragraph 1(2)(b) or a determination under paragraph 2(1) by the bankrupt or arranging debtor, as the case may be, to an employee, and that Act shall have effect accordingly. Formal proof of the debts to which priority is given under this subparagraph shall not be required except in cases where it may otherwise be provided under that Act.

C27

Application of section extended (16.05.2012) by Protection of Employees (Temporary Agency Work) Act 2012 (13/2012), s. 25 and sch. 2 para. 5(2), commenced on enactment.

SCHEDULE 2

Redress for certain contraventions of Act

Provisions relating to winding up and bankruptcy.

5. ...

(2) There shall be included among the debts which, under section 81 of the Bankruptcy Act 1988 are, in the distribution of the property of a bankrupt or arranging debtor, to be paid in priority to all other debts, all compensation payable by virtue of a decision under paragraph 1(2) or a determination under paragraph 2(1) by the bankrupt or arranging debtor, as the case may be, to an employee, and that Act shall have effect accordingly, and formal proof of the debts to which priority is given under this subparagraph shall not be required except in cases where it may otherwise be provided under that Act.

C28

Application of section extended (9.08.2011) by Criminal Justice Act 2011 (22/2011), s. 20 and sch. 2 para. 5(3) and (4), S.I. No. 411 of 2011.

SCHEDULE 2

Redress for Contravention of section 20(1)

Provisions relating to winding up and bankruptcy

5. ...

(3) There shall be included among the debts which, under section 81 of the Bankruptcy Act 1988 are, in the distribution of the property of a bankrupt or arranging debtor, to be paid in priority to all other debts, all compensation payable by virtue of a decision under paragraph 1(2)(b) or a determination under paragraph 2(1)(b) by the bankrupt or arranging debtor, as the case may be, to an employee, and that Act shall have effect accordingly.

(4) Formal proof of the debts to which priority is given under subparagraph (3) shall not be required except in cases where it may otherwise be provided under the Bankruptcy Act 1988.

C29

Application of section extended (21.12.2009) by National Asset Management Agency Act 2009 (34/2009), s. 223(3), (4) and sch. 2 para. 5(2), S.I. No. 545 of 2009.

SCHEDULE 2

Redress for Contravention of section 223(3)

Provisions relating to winding up and bankruptcy

5. ...

(2) There shall be included among the debts which, under section 81 of the Bankruptcy Act 1988 are, in the distribution of the property of a bankrupt or arranging debtor, to be paid in priority to all other debts, all compensation payable by virtue of a decision under paragraph 1(2)(b) or a determination under paragraph 2(1) by the bankrupt or arranging debtor, as the case may be, to an employee, and that Act shall have effect accordingly. Formal proof of the debts to which priority is given under this subparagraph shall not be required except in cases where it may otherwise be provided under that Act.

C30

Application of section extended (1.01.2007) by Employment Permits Act 2006 (16/2006), s. 26(3), (4) and sch. 2 para. 5(2), S.I. No. 682 of 2006.

SCHEDULE 2

Redress for Contravention of section 26(3)

Provisions relating to winding up and bankruptcy.

5. ...

(2) There shall be included among the debts which, under section 81 of the Bankruptcy Act 1988 are, in the distribution of the property of a bankrupt or arranging debtor, to be paid in priority to all other debts, all compensation payable by virtue of a decision under paragraph 1(2)(b) or a determination under paragraph 2(1) by the bankrupt or arranging debtor, as the case may be, to an employee, and that Act shall have effect accordingly, and formal proof of the debts to which priority is given under this subparagraph shall not be required except in cases where it may otherwise be provided under that Act.

C31

Application of section extended (1.12.2005) by Social Welfare Consolidation Act 2005 (26/2005), s. 19(5), S.I. No. 923 of 2005.

Winding-up and bankruptcy.

19.—(1) In this section “Act of 1988” means the Bankruptcy Act 1988 .

...

(5) There shall be included among the debts which under section 81 of the Act of 1988 are, in the distribution of the property of a bankrupt or arranging debtor, to be paid in priority to all other debts, all employment contributions payable by the bankrupt or arranging debtor during the 12 months before the date of the order of adjudication in the case of a bankrupt or the filing of the petition for arrangement in the case of an arranging debtor, and that Act has effect accordingly, and formal proof of the debts to which priority is given under this subsection is not required except in cases where it may otherwise be provided by general orders made under that Act.

C32

Application of section extended by Protection of Employees (Employers’ Insolvency) Act 1984 (21/1984), s. 10(2A), as inserted (6.04.2004) by Industrial Relations (Miscellaneous Provisions) Act 2004 (4/2004), s. 15, S.I. No. 138 of 2004.

Transfer to Minister of certain rights and remedies

10.— ...

[(2A) Where the Minister makes a payment to an employee under section 6(2)(a)(iii)(II) (inserted by section 15 of the Redundancy Payments Act 2003) of this Act, that payment shall be recoverable by the Minister as a debt to be paid in priority to all other debts under—

(a) section 81 of the Bankruptcy Act 1988, or

(b) section 285 (as amended by section 10 of the Companies (Amendment) Act 1982 and section 134 of the Companies Act 1990) of the Companies Act 1963,

and any amount of that payment which would, but for the limit set by section 6(4)(a) (as may be varied by regulations under section 11(5)), be payable to an employee, shall be treated for all purposes as if it were a payment required to be paid by virtue of an award under section 12(1) of the Act of 1973. ]

...

C33

Application of section extended (2.07.2001) by Carer’s Leave Act 2001 (19/2001), s. 25(2), commenced on enactment.

Winding up and bankruptcy.

25.— ...

(2) There shall be included among the debts that, under section 81 of the Bankruptcy Act, 1988, are in the distribution of the property of a bankrupt or arranging debtor, to be paid in priority to all other debts, any compensation payable under this Act by the bankrupt or arranging debtor, as the case may be, to an employee, and that Act shall have effect accordingly, and formal proof of the debts to which priority is given under this subsection shall not be required except in cases where it may otherwise be provided by rules of court.

C34

Application of section extended (21.12.2000) by National Training Fund Act 2000 (41/2000), s. 5(11), (12), S.I. No. 494 of 2000.

Collection of levy.

5.—...

(11) There shall be included among the debts which, under section 81 of the Bankruptcy Act, 1988, are, in the distribution of the property of a bankrupt to be paid, subject to section 119 of that Act, in priority to all other debts, all levy payable pursuant to section 3 by the bankrupt during the period 12 months before the date of the order of adjudication, and that Act shall have effect accordingly, and formal proof of the debts to which priority is given under this subsection shall comply with the provisions of the First Schedule to that Act and any rules of court relating to proof of debt.

...

C35

Application of section extended (1.04.2000) by National Minimum Wage Act 2000 (5/2000), s. 49(2), (3), S.I. No. 96 of 2000.

Provisions relating to winding-up and bankruptcy.

49.— ...

(2) There shall be included amoung the debts which, under section 81 of the Bankruptcy Act, 1988, are, in the distribution of the property of a bankrupt or arranging debtor, to be paid in priority to all other debts, all arrears of pay payable under this Act by the bankrupt or arranging debtor.

(3) Formal proof of the debts to which priority is given under subsection (1) or (2) shall not be required except in cases where it may otherwise be provided by rules or general orders made under the respective Act.

C36

Application of section extended (18.10.1999) by Employment Equality Act 1998 (21/1998), s. 103(2), S.I. No. 320 of 1999.

Provisions relating to insolvency.

103.— ...

(2) There shall be included among the debts which, under section 81 of the Bankruptcy Act, 1988, are, in the distribution of the property of a bankrupt or arranging debtor, to be paid in priority to all other debts, all relevant compensation payable under this Part by the bankrupt or arranging debtor, as the case may be, and that Act shall have effect accordingly, and formal proof of the debts to which priority is given under this subsection shall not be required except in cases where it may otherwise be provided by general orders made under that Act.

C37

Application of section extended (3.12.1998) by Parental Leave Act 1998 (30/1998), s. 24(2), commenced as per s. 1(2).

Winding up and bankruptcy.

24.— ...

(2) There shall be included among the debts that, under section 81 of the Bankruptcy Act, 1988, are, in the distribution of the property of a bankrupt or arranging debtor, to be paid in priority to all other debts, any compensation payable under this Act by the bankrupt or arranging debtor, as the case may be, to an employee, and that Act shall have effect accordingly, and formal proof of the debts to which priority is given under this subsection shall not be required except in cases where it may otherwise be provided by rules of court.

C38

Application of section extended (6.04.1997) by Taxes Consolidation Act 1997 (39/1997), ss. 982 and 994, commenced as per s. 1097.

Preferential payment.

982.—The priority attaching to assessed taxes under section 81 of the Bankruptcy Act, 1988, and sections 98 and 285 of the Companies Act, 1963, shall apply to capital gains tax.

...

Priority in bankruptcy, etc. of certain amounts.

994. (1) In this section, “employer’s liability for the period of 12 months” means all sums which an employer was liable under this Chapter and any regulations under this Chapter to deduct from emoluments to which this Chapter applies paid by the employer during the period of 12 months mentioned in subsection (2), reduced by any amounts which the employer was liable under this Chapter and any regulations under this Chapter to repay during the same period, and subject to the addition of interest payable under section 991 .

(2) There shall be included among the debts which under section 81 of the Bankruptcy Act, 1988, are to be paid in priority to all other debts in the distribution of the property of a bankrupt, arranging debtor or person dying insolvent so much as is unpaid of the employer’s liability for the period of 12 months before the date on which the order of adjudication of the bankrupt was made, the petition of arrangement of the debtor was filed or, as the case may be, the person died insolvent.

C39

Application of section extended (20.03.1995) by Adoptive Leave Act 1995 (2/1995), s. 38(2), S.I. No. 64 of 1995.

Provisions relating to winding up and bankruptcy.

38. ...

(2) There shall be included among the debts which, under section 81 of the Bankruptcy Act, 1988, are, in the distribution of the property of a bankrupt or arranging debtor, to be paid in priority to all other debts, all compensation payable under this Part by the bankrupt or arranging debtor, as the case may be, to an adopting parent, and that Act shall have effect accordingly, and formal proof of the debts to which priority is given under this subsection shall not be required except in cases where it may otherwise be provided by general orders made under that Act.

C40

Application of section extended (30.01.1995) by Maternity Protection Act 1994 (34/1994), s. 36(2), S.I. No. 16 of 1995.

Provisions relating to winding up and bankruptcy.

36. ...

(2) There shall be included among the debts which, under section 81 of the Bankruptcy Act, 1988, are, in the distribution of the property of a bankrupt or arranging debtor, to be paid in priority to all other debts, all compensation payable under this Part by the bankrupt or arranging debtor, as the case may be, to an employee, and that Act shall have effect accordingly, and formal proof of the debts to which priority is given under this subsection shall not be required except in cases where it may otherwise be provided by general orders made under that Act.

C41

Application of section extended (25.03.1994) by Industrial Training (Apprenticeship Levy) Act 1994 (3/1994), s. 12(3), S.I. No. 61 of 1994.

Provisions relating to winding up and bankruptcy, etc.

12. ...

(3) ( a) There shall be included among the debts which, under section 81 of the Bankruptcy Act, 1988, are, in the distribution of the property of a bankrupt to be paid, subject to section 119 of that Act, in priority to all other debts, all levy payable pursuant to section 2 by the bankrupt during the period of 12 months before the date of the order of adjudication, and that Act shall have effect accordingly, and formal proof of the debts to which priority is given under this subsection shall comply with the provisions of the First Schedule to that Act and any rules of court relating to proof of debt.

( b) Paragraph (a) of this subsection shall be construed so as to apply to an arranging debtor in the same manner as it applies to a bankrupt and, accordingly, the reference in that paragraph to the period of 12 months before the date of the order of adjudication shall be construed as a reference to the period of 12 months before the date of the presenting of the petition for protection.

C42

Application of section extended (29.08.1989) by European Communities (Preferential Treatment For Debts in Respect of Levies on Production of Coal and Steel) Regulations 1989 (S.I. No. 219 of 1989), reg. 3(1).

3.(1)( a) There shall be included among the debts which, under section 81 (1) of the Bankruptcy Act, 1988, are to be paid in priority to all other debts in the distribution of the property of a bankrupt—

(i) any debts arising from the application of the levies referred to in Articles 49 and 50 of the ECSC Treaty which shall have fallen due within the period of twelve months next before the date of the order of adjudication of the bankrupt was made, and

(ii) any surcharges, in respect of delay in paying those levies, referred to in Article 3 of the Commission Recommendation.

( b) Subparagraph ( a) of this paragraph shall, for the purposes of section 81 of the Bankruptcy Act, 1988, be deemed to be contained in subsection (1) of that section and, in particular, subsections (7) and (9) of that section shall be construed accordingly.

Editorial Notes:

E22

Priority attaching to taxes to which section applies prescribed by Taxes Consolidation Act 1997 (25/1997), s. 960P, as inserted (24.12.2008) by Finance (No. 2) Act 2008 (25/2008), s. 97 and sch. 4 para. 1(b), commenced on enactment; amended (1.11.2010) by Value-Added Tax Consolidation Act 2010 (31/2010), ss. 123 and sch. 7, commenced as per s. 125; and (1.01.2012) by Finance Act 2011 (6/2011), s. 20(1)(n), S.I. No. 660 of 2011; and (1.01.2013) by Finance (Local Property Tax) Act 2012 (52/2012), s. 158 and schedule item 7, S.I. No. 589 of 2012.

E23

Section confirmed to apply to the recovery of interest payable on overdue income tax and corporation tax as if the interest were a part of the tax (6.04.1997) by Taxes Consolidation Act 1997 (39/1997), s. 1080(3), (4), commenced as per s. 1097, as substituted (25.03.2005) by Finance Act 2005 (5/2005), s. 145, commenced on enactment.