What is Bankruptcy Tourism?
In basic terms, bankruptcy tourism is the phrase now being used to describe the situation where a person moves from a European Country, to England or Wales to file for bankruptcy.
The main reason that bankruptcy tourism is becoming an issue for the Courts and Insolvency Service is that many people feel that the bankruptcy system is being abused in this country. This is a matter that could be debated in many ways.
If we look at the way bankruptcy is dealt with in many other European States, we can instantly see why filing for bankruptcy in England or Wales may be preferable when compared with other Countries.
Bankruptcy in Ireland and Germany
Living in the Republic of Ireland means that you can file for bankruptcy in a similar manner to filing for bankruptcy in England and Wales. You will have to complete forms, deal with the Courts and Insolvency Service, and your assets and income will be scrutinised. The main difference is that Bankruptcy in the Republic of Ireland will last for twelve years compared to one year in England or Wales. In fact, in many cases that we deal with, people may be subject to an “early discharge” from bankruptcy, meaning that the actual period of bankruptcy in their particular case may be only seven or eight months and at this point the bankruptcy ends.
To file for bankruptcy in England or Wales a person needs to show that their “centre of main interest” or COMI is located within England or Wales. This is normally decided on how long the person has lived at a specified address. If a person has been living at an address in England or Wales for six months or longer, the local County Court will accept a person’s bankruptcy as their COMI is now within that area.
If we look at the situation in Germany, it is very similar. If you have debts in Germany you are able to file for bankruptcy and again you will enter into a situation where you complete forms, go to Court and your assets and income are detailed within your bankruptcy.
The main difference is once again the length of the bankruptcy. In Germany you will be bankrupt for seven years, but by moving to England or Wales a person will be subject to the normal twelve months or possibly less.
Bankruptcy for Irish Residents
It has recently been highlighted that many Irish residents are looking to move to England to file for bankruptcy. A recent article made aware the plight of many people in Ireland that bought into the property boom, only to slowly watch their investments value decrease to the point that the property or properties were all in negative equity.
This situation has occurred many times. Not only with Irish residents but lots of Individuals living overseas outside of Europe have this same situation with property in England and Wales. The loss of equity means that in many cases people have no option but to give the property back to the lender. This leaves a significant shortfall which the mortgage holder is liable to pay personally.
Due to the twelve-year period of bankruptcy in Ireland most individuals have decided on alternative solutions due to the impact a bankruptcy will have on them. Apart from the affect upon their credit and day to day life, bankruptcy still has a certain stigma associated with it, and for these reasons filing for bankruptcy in an area far away from a person’s home town may be simpler to deal with when considering the privacy that this provides.
English Bankruptcy for German residents
In recent years there has also been an influx of German residents relocating to England to file for bankruptcy. In a similar situation to Ireland, Germany has a seven-year bankruptcy period which can be reduced to one year by moving to England or Wales.
For these reasons it is tempting to a German resident to move to England to file for bankruptcy. Debts within the European Union can be dealt with by way of English bankruptcy legislation and the whole process is significantly shorter.
Due to this new system of bankruptcy tourism, the Courts have become stern when dealing with these types of insolvencies. In many circumstances the bankruptcy may not be accepted on the exact day that the person makes the application – we are mindful that many of these types of cases are actually referred to a later date to be reviewed in better detail before the bankruptcy order is granted.
The system itself has led to many cases where the debtor claims to have lived in the UK for the necessary amount of time only for the Court to find out that this is in fact does not tie up with other information on the electoral register and other platforms. Many cases can be revoked by the Courts if this is found to be a clear abuse of the system.
Summary of Bankruptcy Tourism
Overall, there are two clear and contradictory arguments in relation to bankruptcy tourism.
The first is that this is an abuse of the system used within England and Wales by people moving from a European Country. The second is that this situation has been caused by the introduction of European laws, which people are using to their advantage.
If we look at Bankruptcy Tourism, is it a loophole or an accepted way to recover from a bad situation in the fastest time possible? There is nothing illegal in moving to another Country and at a certain point filing for personal bankruptcy. In fact, the main goal of bankruptcy is to give an individual another chance in life to get back on their feet and start again.
Next Steps
If you want to find out anything further about this topic then please feel free to call me on 0330 236 9930, 0330 236 9938 or 07961 116321. All conversations will be in strict confidence. You can also email me vee@navigatebr.com
This article is for information and interest only. It is not a substitute for full professional advice, which will take in to account the specific and individual circumstances. Navigate Business Recovery Limited cannot accept any responsibility for any loss arising as a result of any person or organisation acting or refraining from acting on any information.
Leave a Reply