Bankruptcy tourism to grow as debtors declare in UK
while former billionaire Sean Quinn filed for bankruptcy in a Belfast court, claiming his assets are now worth less than €50,000, a British company has been tapping into the burgeoning trade in bankruptcy tourism here.
IrishBankruptcyUK was set up by insolvency expert Steve Thatcher, who claims as many as 4,000 Irish residents a year could file for bankruptcy in the UK.
The primary benefit of such a move is that in the UK bankruptcy lasts just 12 months rather than the "life sentence" in Ireland where it is 12 years before bankrupts are discharged from their debts -- although in some cases the process can be completed in five years.
As a result there were just 30 bankruptcies in Ireland in 2010. Another factor discouraging bankruptcy in Ireland is that if you are declared bankrupt you also lose your pension -- which is not the case in Britain.
In Belfast, where Mr Quinn made his successful bankruptcy application last Friday, bankruptcy applications are being heard at the rate of 30 a week.
There are a number of developers who have already declared themselves bankrupt in the UK -- among them Cork-based property developer John Fleming.
Mr Fleming and his construction firms owed €1bn to the banks but in December last year it emerged he had relocated to Billericay in Essex and filed for bankruptcy.
It is believed he handed over all his personal assets to his creditors.
According to Mr Thatcher, going bankrupt in Ireland is not a realistic option and he believes more and more people will go to Britain to settle their financial affairs.
In the UK an average of 1,392 people a week are declared bankrupt, says Britain's Insolvency Service.
"With no end in sight to the financial crisis and Irish banks unwilling to write off debts, people are taking even more desperate measures to free themselves from the burden of unpayable loans and mortgages," said Mr Thatcher.
"Irish people need to try to overcome the stigma of declaring themselves bankrupt -- there is no shame anymore. The laws used to be similarly archaic in the UK until we adopted the American approach that bankruptcy is often unavoidable."
Mr Thatcher claimed that the 1988 Irish Bankruptcy Act functions more as a debt collection service for creditors, rather than as a release from debt.
In contrast, he said, the rationale behind the UK's Enterprise Act of 2002 is that entrepreneurs and consumers in debt should be encouraged to participate again in the economy as soon as possible by obtaining a quick release from debt.
Under EU rules an Irish resident is allowed to move to the UK and, once established there, can declare themselves bankrupt.
Mr Thatcher claimed his company's Irish representative is meeting clients all over the country to assist them in achieving UK bankruptcy.
Justice Minister Alan Shatter is keen to overhaul Irish laws and is proposing individuals should be able to emerge from bankruptcy after three years rather than the current 12.
There are also plans for debt relief orders, where those with no assets can write off debt within a short period. The proposals also include the introduction of debt settlement arrangements.
However, the Central Bank has warned that including mortgage debt in the new bankruptcy regime could leave banks with large losses.
For Irish creditors who are owed sums of money, the growth of bankruptcy tourism is worrying -- especially in cases where they believe that those who owe them money are in a position to pay.
According to IrishBankruptcyUK there are three phases that indebted Irish residents have to take before being declared bankrupt in Britain.
A note on the process involved in 'Phase 1' states that even those Irish who are not sure they should take the bankruptcy route should establish Britain as the 'Centre of Main Interests' (COMI).
"Essentially this is a step towards UK bankruptcy for a client who is still negotiating with their creditors, but is making themselves fully prepared for any unacceptable negative actions take by those creditors.
"This phase puts the client, who has to declare bankruptcy, one step ahead because they have time to declare in the UK and avoid being forced into the 'life sentence' imposed under current Irish legislation," Mr Thatcher said.