Saturday 25 October 2014

Nurses and teachers increasingly taking breaks in UK to go bankrupt

Public service workers turn to lenient British personal insolvency law

MARK O'REGAN and MAEVE SHEEHAN

Published 09/02/2014 | 02:30

Woman with debts
Teachers and nurses are resigning to go bankrupt

NURSES and teachers are taking sabbaticals from their public service jobs to go bankrupt in the UK, the Sunday Independent has learned.

Irish and British lawyers claim there is a growing trend of public service workers taking time out from their jobs and moving across the water for a year to avail of the UK's more lenient bankruptcy regime.

Steve Thatcher, a Leicester-based insolvency lawyer, said the surge of high profile Irish businessmen who moved to Britain to go bankrupt has been replaced by middle income earners such as nurses and teachers.

He said growing numbers of them are applying for career breaks to move to the UK, where emerging from bankruptcy can take as little as a year as opposed to three years in Ireland.

"I have had civil servants who have been able to get extended time [to] come across and do what is necessary to be declared bankrupt," Mr Thatcher – who advises Irish people seeking residence in the UK to shed their debts – told the Sunday Independent.

"They spend four or five months setting up what is described as their centre of main interest in the UK. They then spend a subsequent six or seven months dealing with the official receiver . . . then they could go back at their job in Ireland while the bankruptcy process is being completed."

Anthony Joyce, an Irish lawyer specialising in personal insolvency, confirmed the trend of Irish people taking sabbaticals to go to the UK.

"In a number of cases we've seen school teachers do it. Most of them are single. We live beside a neighbour which has got the most forgiving bankruptcy laws in Europe and who speaks English.

"Until Ireland has the same mentality as they have in the UK, which is to forgive rather than to punish, then we will continue seeing people avail of their much more lenient system.''

The phenomenon reflects the growing numbers of middle class families on ordinary salaries, heavily in debt following the property crash and now looking for a way out of their financial difficulties.

Public servants have emerged as one of the biggest group of debtors inquiring about going bankrupt since Ireland's new insolvency regime came into effect last year, according to the Irish Mortgage Holders Association (IMHA).

Meanwhile, new figures obtained by the Sunday Independent show that teachers, nurses and civil servants were amongst the growing ranks of middle classes defaulting on their debts.

Four nurses, eight teachers, two civil servants and a garda were named in Stubbs Gazette last year for not paying their debts.

The teachers had judgements registered against them for a total €71,534 – an average of over €8,000 each. Four nurses owed a total of €180,661, while two people who described themselves as civil servants owed €11,777.

A single garda had judgement registered against him for €48,151.

However, professional classes dominated the list. Some 59 solicitors, 68 accountants, six doctors, six barristers and four dentists were named and shamed in the debt agency magazine. Their collective debts came to €13.8m – with most of that owed to the tax man.

Of the 59 solicitors, 41 were being sued by the Revenue Commissioners and 61 of the 68 accountants owed their debt to the taxman. Six doctors, meanwhile, collectively owed a massive €2.3m.

Publicans and construction workers were the largest group of debtors, with 92 publicans owing €5.1m and 98 construction workers owing €5.7m.

In total, more than 2,453 people had court judgements registered against them last year but most were described in court papers not by their profession, but as gentlemen, gentlewomen, married, femme sole or spinster.

David Hall, of the Irish Mortgage Holders' Organisation, said debt is "coming home to roost" for the middle classes this year. He said public sector pay cuts are now biting, mortgage arrears are mounting and most families have long used up their savings.

Those who cannot afford to broker a deal with their creditors through the insolvency service have no option but to go bankrupt. But with bankruptcy fees increased by the State last week, even that is becoming unaffordable.

Mr Hall said while some civil servants are availing of sabbaticals to try to go bankrupt faster in the UK, it is not happening "in massive numbers".

"Civil servants entitled to career breaks, unlike people in the private sector, have the advantage. And single civil servants have a greater mobility to go bankrupt in the UK," he said.

The numbers of Irish citizens applying for bankruptcy in the UK continues to increase. Last year 157 people applied for bankruptcy, up 48 per cent on 2012.

Anyone trying to go bankrupt in the UK must prove that it is their "centre of main interest", which means they must live and work there for at least a year.

Career breaks mean that those lucky enough to secure a bankruptcy ruling within a year can return to their permanent pensionable jobs at the end of the process. However, the bankruptcy system in the UK can take longer.

Steve Thatcher said he has dealt with a significant number of Irish nurses, who like teachers, have the advantage of transferable skills.

"Some of those who have come over from Ireland actually decide to stay in Britain having rid themselves of their debts," he said.

"Lots of families have moved this year for the first time. In the past it was the big developers who were coming over and large amounts of money were involved.

"But now the sums being written off range from around €120,000 to €1m. In the main, these are people with debts on the family home, and who also owe money on one or two investment properties. I would estimate that average debt is now about €500,000 – a few years ago it was between €15 and €20m."

Irish teaching unions claimed they were not aware of members using leave of absence entitlements to avail of UK bankruptcy laws.

The ASTI said it is not aware of teachers looking for leaves of absence to avail of bankruptcy.

"We are aware that many teachers are under financial strain. For example, many teachers who bought their homes at the height of the boom and then suffered two pay cuts are under severe financial stress . . . We expect that a growing number of teachers will seek personal solvency arrangements, rather than bankruptcy arrangements, due to debt problems."

The INTO said teachers can apply for a career break after at least 12 months of continuous employment in the same school but the Department of Education doesn't have to be informed of the reason.

According to the latest figures, there are currently 1,174 primary school teachers on sabbatical.

Sunday Independent

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