Financial Affairs Contributor
Britain’s newest and potentially fastest-growing export in Europe is no other than bankruptcy. In particular, Irish entrepreneurs devoured by debt from a property boom gone wrong are taking advantage of Britain’s progressive and relatively less onerous bankruptcy laws to gain fast relief from crippling debt.
In Britain, bankrupts can be discharged within a year of declaring themselves bankrupt, whereas entrepreneurs declaring themselves bankrupt in Ireland have to wait 12 years before being discharged. In Ireland last year, there were around 29 bankruptcies compared with 79,000 in Britain. According to David Carson of Deloitte’s insolvency unit in Dublin: “The law is just incredibly penal“. But, as under European Union law, Irish debtors/ European Union states’ citizens, can file for bankruptcy anywhere in Europe, Irish debtors are flocking to Britain where they can be rid of their debt within 12 months. As a result, in Dublin, ‘bankruptcy tourism’ is the hottest conversation in town among struggling business folk.
Jim Stafford, of the corporate recovery practice Friel Stafford, it a chartered accountant who advises clients to go for bankruptcy in any one of the following cases: 1) a creditor is being vindictive and will not cut a reasonable deal; 2) a client in difficulty is expecting a large inheritance (he says: “you can go to the UK, come back in 12 months and it will still be there for you; that’s a factor for some people”); 3) or if a client has a large pension. That is because a pension is not included in the estate divided up by courts in Britain, whereas it is in Ireland. Stafford says he begun to get approaches about bankruptcy filings in Britain and the USA in late 2008 after the large investment bank, Lehman Brothers, collapsed – “..the phone started hopping and it hasn’t stopped since”, he says.
Guardian UK reports that there are no Irish government, or other reliable statistics on Irish people relocating to the Britain for bankruptcies, but there have been a few prominent cases, such as the one involving the Cork-based property developer, John Fleming. He and his property development firms owed €1bn to the banks. Last December it came to light that he has relocated to Essex in England and had filed for bankruptcy. Guardian UK reports that according to Barry Cahir, a partner with the Dublin law practice William Fry: “Irish people are turning to places like the UK because it is a friendlier regime – if you behave yourself and co-operate with the trustee you can be out of the woods in less than a year.” He and three colleagues advised over 180 clients this week about bankruptcy in Britain.
The Guardian reports Frances Coulson, vice-president of insolvency professionals’ trade body R3, commenting: “People can come to the UK to take advantage of our bankruptcy rules just as we might go to Poland to get our teeth done.”
- Bankruptcy tourism draws debt-stricken Irish (guardian.co.uk)
- Giordano’s Files For Bankruptcy Protection (chicagoist.com)
- Easy to escape negative equity if you move to the UK (politics.ie)
- Michigan Bankruptcy Requirements: Post-filing Debtor Education (socyberty.com)
- Borders files for Chapter 11 bankruptcy (marketwatch.com)
- Ireland’s austerity plan is self-defeatingly harsh | Will Hutton (guardian.co.uk)
- You: Irish frontrunner makes debt vow (guardian.co.uk)
- You: Irish election in a time of quiet rage (guardian.co.uk)