Sunday 11 December 2016

UK v Ireland: how bankruptcy differs between the two

Published 12/11/2011 | 05:00

Has Sean Quinn fled across the Border to escape his debts?

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No, he applied for voluntary bankruptcy in Belfast. The money he owes in the Republic, including to Anglo, will all be included in the UK bankruptcy.

So why go to Belfast?

Sean Quinn is from Fermanagh and has long-standing connections to Northern Ireland. He says the High Court in Belfast was simply the appropriate place for him to be declared bankrupt.

But?

But the UK has a much softer bankruptcy system than the Republic. Under the rules there, Mr Quinn could be debt-free in a year, compared with 12 years in the Republic.

So the UK is the soft option?

Any bankruptcy is serious but Belfast is the softer option.

What is bankruptcy?

Bankruptcy means admitting you can't honour your debts and handing control of your finances to the courts.

In the UK, the court appoints a trustee to manage your affairs. They sell everything -- including your share in the family home, your cars, watches and jewellery -- and divide the money raised between those to whom you owe money. Even if the cash raised does not cover the loans, it does not matter -- the bankrupt person is no longer responsible for the debt.

A bankrupt person loses the right to manage their financial affairs. They cannot be a director of a company for the period, are not allowed to borrow money and the trustee has complete control of every penny they own.

So even if you owe billions, you are free and clear in a year under the UK rules?

Yes, with two main exceptions. If you owe a lot of money, the UK courts will expect you to live a modest lifestyle for two years after the bankruptcy. To make sure it happens, they take a share of your wages, but won't prevent you going back into business.

The other exception is more serious. If the official managing the bankruptcy thinks the bankrupt person is hiding assets or has undeclared income, they can prevent them from exiting the bankruptcy.

How can Irish debts be cancelled by UK courts?

Under an international treaty, all countries in the European Economic Area, which includes all of the EU plus the likes of Switzerland, have agreed that a bankruptcy in any country is respected in all the others.

Sean Quinn says he owes Anglo €200m, the bank says he owes 10 times that; does that matter?

It's up to the trustee to listen to both sides before deciding on the correct figure.

And after all that, you start with a clean slate?

Yes, debts are effectively written off after bankruptcy.

Is there anything to stop this?

Anglo has already queried Sean Quinn's right to use the UK system and can go to court with a formal objection.

Irish Independent

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