Ronald Quinlan: Bankruptcy in UK – not just for rich and famous
The UK's more benign bankruptcy regime may still attract Irish people
Published 06/01/2013 | 05:00
JUSTICE Minister Alan Shatter may well believe he has struck the right balance between the rights of debtors and their creditors with the long overdue reform of Ireland's Dickensian bankruptcy laws.
But whatever way you look at it, the reduction in the term of bankruptcy from 12 years to three years with the distinct possibility of being kept on the hook by your creditors for a further five years would appear to be yet another example of an Irish solution to an Irish problem.
Add to that the €3m ceiling on indebtedness which is due to be applied under the new insolvency regime and it's clear that a substantial number of Ireland's amateur property investors won't even be able to apply for bankruptcy here at home, regardless of the length of time it takes.
But that doesn't mean that they, along with a host of other quite ordinary Irish people laden down with unsustainable mortgages and personal debt, won't continue to go down the UK bankruptcy route where a clean bill of financial health is possible after just 12 months.
Given the preponderance of high-profile UK bankruptcies involving the likes of Nama developers Bernard McNamara, Ray Grehan and Paddy Shovlin and former Fine Gael minister turned bookmaker Ivan Yates, one could be forgiven for thinking that going bust in Great Britain is the preserve of a wealthy elite with deep pockets.
But that's not the case at all according to UK insolvency lawyer, Steve Thatcher, who says he dealt with eight Irish bankruptcy cases in the week leading up to Christmas, people whom he described as "eight normal guys and gals".
Asked by the Sunday Independent what level of financial resources one would need to get through the 12 months that a UK bankruptcy takes beyond the three to six months required to establish the UK as one's Centre of Main Interest (COMI), Steve Thatcher said: "You've got to rent somewhere in the UK, but generally that's going to be cheaper than renting or paying for the mortgage in Ireland. They would need to have some funds to establish themselves prior to getting a job in the UK but an awful lot of people that we take through the process, we get them to find employment before they come here. It's generally cost neutral because if people are working, they're able to defray the expenses."
Commenting on the Irish people he had assisted most recently in their applications for bankruptcy, he added: "I did eight just before Christmas and they were all just normal guys and gals. In some cases, their relationships had ended and they weren't able to continue paying the mortgage. It had gone bad because of the split.
"In other cases, you've got tradespeople who took on investment properties that have gone south and the work has dried up as well. In a lot of cases, you've got investment properties combined with a loss of income.
"I've done my fair share of high-profile bankruptcies but I've done lots of little ones as well, where the person owes up to a million euro. You don't need many investment properties to run up a million euro liability. In terms of a UK bankruptcy, that figure is absolutely huge but in the scheme of what people are carrying back in Ireland, there are lots and lots of those," he said.
Asked for his views on the imminent reform of the bankruptcy laws here, Thatcher said: "It's my view that the new personal insolvency legislation in Ireland won't have any impact on the numbers going to the UK. Those that have the ability to come here will still come here.
"The bankruptcy term is dropping from 12 years to three years in Ireland but there is still a catch provision that suggests where there is income left over from an individual, that can be taken for another five years. My view from talking to people is that they want a solution where they can be done and dusted in one year and in one go."
So what do you need to do if you want to declare bankruptcy in the UK?
* Find a place to live in Northern Ireland, England, or Wales and move there to establish the UK as your Centre of Main Interest (COMI). Ideally your accommodation should be a rented property with at least a six-month short hold tenancy.
* Get a National Insurance Number which allows you to look for work or work on a self-employed basis. The national insurance number is assigned to you following an interview from a Job Centre Plus and entitles you to benefits should you need them at a later stage.
* Open a bank account in the UK. This will allow you to register for utilities such as gas and electricity. Regular activity on your UK bank account and your use of gas and electricity in your rented accommodation will all be checked by the Official Receiver in your bankruptcy case to verify that you are actually resident in the UK.
* Once you have moved to the UK, stay there for at least three months and a day of the six months' residency required to petition for bankruptcy. This will establish that you are habitually resident in the UK and therefore entitled to claim it as your COMI.
* Once you can describe yourself as habitually resident in the UK, contact your local county court and ask them to explain the procedures they will need you to follow to apply for bankruptcy with them. The court may send you a bankruptcy pack which will include a petition and a statement of affairs which you will need to complete.
* After you complete these forms, you will need to attend court with three copies of each document, as well as a fee of stg£700 (€863) which is part court fee and part official receiver's deposit. After the court officials have processed your papers, you will be taken to see the judge. Once the judge is satisfied you are entitled to bankruptcy and has checked that you have established the UK as your centre of main interest, he will grant the bankruptcy order.
* From this point on, your affairs as a bankrupt will be handled by the Official Receiver. The Official Receiver will contact you within 24 hours of your being declared bankrupt. Within three weeks, he will conduct an interview with you to discuss your statement of affairs. After that, his job will be to contact your creditors and realise any assets you may have for their benefit.
* Barring any unforeseen issues, your bankruptcy will come to an end automatically in 12 months.