Hitting the high road for bankruptcy protection
The Westlife singer, 33, joins high-profile Irish figures, including the country’s former richest man, Seán Quinn, and property developer Thomas McFeely, an ex-IRA hunger striker, in opting for bankruptcy protection in the UK.
The attraction for insolvent Irish people dealing with fallout from the worst economic bust in the nation’s modern history is simple. In Ireland, it takes 12 years for a debtor to emerge from bankruptcy, compared with a maximum of 12 months in Britain.
While the Government proposed last month to cut the bankruptcy term to three years, the regime across the Irish Sea or over the border is less punitive.
“You can travel 60 miles up the road from Dublin and be discharged from bankruptcy in a year,” said Ross Maguire, a Dublin- based lawyer who represents debtors facing home repossession. “So people take that option and it’s hard to blame them, shades of exporting our problems yet again.”
Bankruptcy applicants in the UK must prove that they usually live and have their main businesses there, with the process taking up to a year. While there are no definitive records tracking the numbers crossing to the UK seeking bankruptcy, Steve Thatcher, a Leicester, UK-based insolvency lawyer, said he expects to have 500 Irish clients within a year, compared with two in 2010 and 100 at present.
Mr Thatcher set up a website to seek potential clients. He also visits Ireland once every two weeks to meet with clients and hold seminars to advise on how debtors can declare bankruptcy in the UK.
“There is pent-up demand, a critical mass that will result in a big increase in cases next year,” he said. “The majority of the time the banks won’t do deals. It drives people into saying there is a solution across the water.”
Irish house prices dropped about 50% during the past five years, after quadrupling in the decade through to 2007. The country is pockmarked with ghost estates.
Ulster Bank appointed a receiver to Mr Filan’s property development company, Shafin Developments, in April.
A partially finished housing development and a greenfield site are included in the company’s assets, which owes Ulster Bank about €5m. An Ulster Bank spokesman declined to comment.
“Together with a team of financial and legal experts, I have spent months exploring all possible alternatives to bankruptcy, but to no avail,” Mr Filan, said in an emailed statement.
“It was a very difficult decision to take, but the most responsible course of action given the debts I owe to banks on property investments.”
Few choose to go bankrupt in Ireland, partly because terms are so onerous.
Only 29 bankruptcies were registered in 2010, the last year for which figures are available, according to the courts service.
Rather than seek bankruptcy protection, many struggling home-owners have overhauled their loans. Some 79,712 mortgages had been restructured at the end of March, up 7% in three months, according to the Central Bank. That’s about 10% of all mortgages.
Bankruptcy in the UK is far more common. In Northern Ireland, which has less than half the Irish population, 289 people were declared bankrupt in the first quarter.
It’s not always a simple process. Mr Quinn’s voluntary bankruptcy in Belfast was overturned in January when a judge ruled that the main centre of his business is in the Republic, not in Northern Ireland.
The former Anglo Irish Bank, which is owed more than €2bn by Mr Quinn, then forced him into bankruptcy in Dublin.
Mr McFeely, who spent 53 days on hunger strike in a Northern Ireland prison in 1980, has also run into trouble.
The property developer’s bankruptcy application is to be reheard after it was reversed following a challenge by a Dublin woman who bought a home from one of his companies that she said needed €100,000 in repairs. Mr McFeely’s lawyer was unavailable for comment.
“Some individuals have engaged in forum shopping and made a pretense of having a substantial connection with other jurisdictions be it with England or Northern Ireland and some individuals have been unsuccessful in that,” Justice Minister Alan Shatter said.
Mr Shatter said the Government hopes new insolvency legislation to encourage banks and debtors to reach settlements out of court will “at least facilitate a greater engagement in addressing these issues in this state”.
CONNECT WITH US TODAY
Be the first to know the latest news and updates
