Tony Mitchell

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Bankruptcy Tourism – Another E.U. Headache

20th October 2011 09:09

Residents of Ireland with financial problems have an additional reason to visit the UK, “Bankruptcy tourism”. The progressive UK Insolvency legislation makes it very attractive for Irish citizens to move here, for about 6 months, in order to transfer their centre of main interest to the UK, which under European legislation, then allows them to qualify to make themselves bankrupt in the UK.

Last year figures show that in Ireland as few as 29 people were declared bankrupt in that country compared with almost 60,000 in England and Wales. Debt forgiveness in Ireland is not strong and is incredibly penal. An Irish bankrupt is not discharged from bankruptcy for 12 years. To get an earlier discharge, creditors must receive 50 per cent of what they are due. Compare this to the UK where a bankrupt is discharged in 12 months as long as no objection is raised by the Trustee in Bankruptcy, a far cry from 1761 when a bankrupt was hanged at Smithfield for concealment of his assets.

It is not only the Irish that are taking advantage of UK insolvency legislation. For some years debtors from Germany have been relocating to England for the same reasons in respect of not only personal debt but also corporate insolvencies. However the authorities have started a crack down and this month saw the closure of 61 companies set up by a German couple in Britain to help German companies take advantage of the advantageous UK insolvency rules. Also, for some time Insolvency Service officials have been watching for abuses of our insolvency legislation and have taken a number of cases back to the courts and successfully overturned initial bankruptcy orders.

The numbers may not be huge but it is one further example of the difficulties EU officials have in trying to unify a group of countries with very different cultures and backgrounds.

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