There has been a sharp increase in Irish people seeking bankruptcy in Britain, according to latest figures released by Britain’s Insolvency Service.
There were 110 individual cases last year, a significant increase on the 10 per year between 2006 and 2009.
However, it is a tiny fraction of the over 60,000 bankruptcies in the UK last year.
One of the obvious reasons for going to this country’s nearest neighbour to declare bankruptcy is the length of the judicial process. It takes a year to be legally discharged from one’s debts.
Up until now, it took 12 years in Ireland to be discharged from debts. During that period there were still a number of restrictions on the amount of income that could be earned among other limitations.
The lure of a much more lenient regime was obvious. The only surprise, perhaps, is that more Irish people did not go to avail of the service.
There have been a number of high-profile developers who have opted for the UK courts.
Cork developer John Fleming, whose businesses collapsed in 2010 with €1bn in debts, was released from his debt burden in Nov 2011 following a one-year process in the UK.
Mr Fleming is now back living in his West Cork home. Ray Grehan, who set a record for land prices in the heady days of the Celtic Tiger, emerged from a UK bankruptcy process in Dec 2012, free of an estimated €300m of debts.
The former Fine Gael minister, Ivan Yates, is soon to return to these shores, having spent time in Wales.
His company, Celtic Bookmakers, also went under in 2010. He has personal guarantees behind a large chunk of the firm’s debts.
There had been fears that the floodgates would open and Ireland’s distressed borrowers would decamp for the UK when the economy collapsed in 2008. The relatively benign British system is often criticised for attracting ‘bankruptcy tourism.’
But in order to avail of the service, it is necessary for applicants to move their main centre of business interests to the UK. That means physically moving there and establishing a primary residence.
There is also an obligation to disclose all assets. The UK bankruptcy courts recently refused to discharge two Irish property developers Patrick Byrne and Martin Doran from their debts because they both tried to siphon off assets to friends and relatives prior to the judicial process.
The Government has reformed the Irish bankruptcy framework. Instead of 12 years, that has now been reduced to three years.
However, at the end of that three years, the banks have the final say on whether the bankruptcy can proceed. There are still restrictions after this three-year period. Whether it stops the trickle of Irish people going to the UK remains to be seen.
© Irish Examiner Ltd. All rights reserved