Bankruptcy tourism
Bankruptcy tourism is the phenomenon whereby residents of one country move to another jurisdiction in order to declare a personal bankruptcy there, before returning to their original country of residence. This is done in order facilitate bankruptcy in a new jurisdiction where the insolvency laws are deemed to be more favourable. It is most prevalent in Europe where EU laws allow the free movement of residents to other Eurozone countries. Once in the new jurisdiction a person seeking bankruptcy must establish their Centre of Main Interests there in order to qualify as a resident and, therefore, petition for a successful bankruptcy.
The issue of bankruptcy tourism has gained notoriety in the Republic of Ireland due to the recession and property crash there resulting in high levels of debt and personal insolvencies. However, the phenomenon first emerged in the UK in 2009 when it was reported that German and Austrian nationals were moving to Kent in order to take advantage of bankruptcy laws in England and Wales, whilst residing close to Eurostar.[1]
Bankruptcy tourism is now more synonymous with the Republic of Ireland where it has become a high profile issue with one UK-based insolvency solicitor, Steve Thatcher, claiming recently that he had recently written off €1bn in Irish debt for his Irish clients in the UK.[2] The level of Irish debt being written off in the UK has prompted the government there to seek to have EU law amended in order to make it harder for Irish residents to move to the UK and take advantage of more lenient bankruptcy laws there[3] where bankruptcy lasts for a period of twelve months (but salary instalments can required for up to three years)[4] as opposed to twelve years in the Republic of Ireland. Though Thatcher dismisses the validity of the term 'bankruptcy tourism' and instead calls it 'bankruptcy emigration' as he says people have to emigrate to the UK in order to go bankrupt with the majority of his clients remaining in the UK once their bankruptcy is complete.[5] Since, Ireland has reduced the duration of its insolvency procedures, and since 2016 has a 1-year bankruptcy procedure as well.[6] However, access to such procedures may still be restricted due to barriers such as requirement to pay for legal procedures, limited size of the debt, or if one already went through a procedure before. Still, England and Wales have among the shortest and most accessible procedures in the EU,[4] and continues attracting bankruptcy tourism in particular among over-indebted people with assets.
Notable Irish Bankrupts in the UK
[edit]The most prominent cases of alleged bankruptcy tourism are perhaps those of David Drumm former chief executive of Anglo Irish Bank[52] and property developer John Fleming. Fleming,[7] who had personally guaranteed much of the €1 billion debt of Tivway and associated companies in Ireland, was discharged from bankruptcy in the UK on 10 November 2011, the anniversary of the date on which he was declared bankrupt there.
Other well known figures who have moved from the Republic of Ireland to the UK in order to go bankrupt are as follows:
- Shane Filan;[8]
- Sean Quinn (bankruptcy petition overturned);[9]
- Ray Grehan;[10]
- Tom McFeeley (bankruptcy petition overturned);[11]
- Ivan Yates;[12] and
- Brian O'Donnell (his bankruptcy is currently being challenged in the UK courts).[13]
External links
[edit]- http://abg-law.com/wp-content/uploads/2014/06/Bankruptcy-Tourism-Article-June-2014.pdf For a discussion of how the English courts have sought to tackle the phenomenon of bankruptcy tourism.
References
[edit]- ^ Harry Wallop (22 Sep 2009). "Tunbridge Wells the 'debt capital of Europe'". Telegraph.
- ^ Henry McDonald (27 May 2012). "Irish dodge debts through UK 'bankruptcy tourism' | World news". The Guardian. Archived from the original on 29 May 2012.
- ^ John Walsh (28 February 2013). "Shatter bid to stop 'bankruptcy tourism'". Irish Examiner.
- ^ a b Eurofound. "Household debt advisory services in the European Union" (PDF). Retrieved 25 May 2016.
- ^ https://www.irishtimes.com/business/sectors/financial-services/bankruptcy-in-britain-still-an-option-for-irish-1.956758 [dead link]
- ^ Citizens Information. "Personal insolvency in Ireland".
- ^ Kim Bielenberg (29 September 2012). "Bankrupt builder who owed €1bn back living in his former home". Independent.ie.
- ^ Anne-Marie Walsh (14 January 2013). "Bankrupt Westlife star Filan keeps €38,400 wedding ring". Independent.ie.
- ^ Staff writers (16 January 2012). "Seán Quinn says IBRC has vendetta against him". RTÉ News.
- ^ Staff writers (6 January 2012). "Ray Grehan declared bankrupt in the UK". RTÉ News.
- ^ Staff writers (30 July 2012). "Thomas McFeely declared bankrupt in Ireland". RTÉ News.
- ^ David Medcalf (4 September 2012). "Welsh court declares Ivan Yates bankrupt". Independent.ie.
- ^ Mark Hennessy (7 December 2012). "Judge questions facts of O'Donnells' move to London". Irish Times. Archived from the original on 11 April 2013.