Monday 28 May 2012

The Irish dodge debts

Irish dodge debts through UK 'bankruptcy tourism
Bankrupt clients from Ireland have used a Leicester solicitor and UK courts to wipe out more than €1bn debts taken out in the republic

the Guardian,27 May, 2012
A solicitor in Leicester has helped Irish clients escape more than €1bn (£798m) of debt by taking advantage of a booming trade in "bankruptcy tourism".
Data seen by the Guardian reveal Steve Thatcher, who runs the new advisory service boasts at least 55 clients in the process of clearing some €1.2bn by using UK courts to wipe out loans taken out in the republic. One property speculator wrote off €150m during a 35-second court appearance.
While bankrupts in the UK face only one year in financial purdah, in Ireland it is 12 years – despite promises of reform from the Dublin government.
Such is the stigma still associated with bankruptcy in Ireland that "Michael" and "Mary" are unwilling to give their real names after they used the UK courts to write off nearly €320,000 of negative equity and other debts. They fear that in Ireland they could be blacklisted from jobs if potential employers knew they were bankrupts.
The north county Dublin couple's story is typical of tens of thousands of Irish people who jumped on-board the seemingly never ending, rising Irish property market and who borrowed to build businesses during the boom years.
Mary, a mother of two young sons in her late 20s, described taking the British bankruptcy route as "like winning the lottery".
At a hotel near Dublin Airport on Thursday she explained how much debt they had become mired in by 2009.
"With negative equity on the new house we had bought and the loans my husband had taken out to start a new business we were around €320,000 in debt. With the economy in so much trouble, my husband's business going to the wall and my hours having been cut drastically at work we were in deep financial trouble. And we were not high flyers or big spenders. The car we run still had a 2001 registration, we did not take holidays for years, there was no high life."
Her husband said that by 2009 they were so desperate he started to "Google our way to find a solution" and hit upon the – a new financial service offering to bankrupt Irish debtors in British courts.
By that time they were living in one of Ireland's notorious "ghost estates" - private housing developments that were built at break neck speed during the Celtic Tiger years but which became symbolic, empty shells once the economy crashed.
"My business as a personal trainer and nutritionist collapsed in the recession in 2009 and I had very little cash flow. We were now way over our heads in terms of debt but the banks and building societies we had borrowed from didn't want to know, they sent threatening legal letters demanding full payments, they warned we would be taken to court and for a while every single piece of our income went to paying the loans and debts," Michael said.
He said they were living off Mary's parents generosity in terms of paying for food and fuel until they came upon the British-bankruptcy bolt hole.
"I remember we had had a big row over money and later in the early hours of the morning I came up to my wife and said I think I've found a way out. I showed her the website that offered to help Irish people get bankrupt in the UK. It seemed the only way out."
Mary and Michael said they had no qualms about having to temporarily emigrate as they had no attachment to the house on the ghost estate that had become a financial ball and chain around them. Using the Ryanair route they emigrated to Newport in Wales in the summer of 2010, rented property and lived there for nine months.
"At first I said that would never work but in the end it did. We posted back the keys to the house, informed the banks and building societies we were moving to Britain and after only six months were able to go to court in Swansea and become bankrupt," Mary said.
Speaking in Dublin after a seminar attended by 500 potential new clients, Thatcher said British county courts are generally sympathetic and co-operative with would-be Irish bankrupts.
"The Insolvency Service has certainly seen the rise in Irish bankrupts coming to the UK. The courts can be hit and miss because there are judges dealing with bankrupts who are normally looking to wipe out, say, £50,000 to £70,000 and now they are facing Irish business people with say €20m of debt, so eyebrows are certainly raised.
" They still make the orders but the courts do ask questions. Because if you have been resident, if your centre of main interest is established, then by and large they do make the bankruptcy orders."
Thatcher said he has taken one case through a court in Liverpool this spring where an Irish builder wiped out a €150m debt.
"It was a rubber-stamping exercise after I had taken him through the process and the 26-page form. It was all over in about 35 seconds. The way it's going I am sure you are going to get judges in Britain dining out on stories about Irish bankrupts telling their friends at the table 'You think you are in trouble with money, guess who I had in my court today and what they owed before they were bankrupt. I had an Irishman in court today owing €20m.'"
He stressed that if Irish debtors have huge busted property portfolios he encourages them to hand the keys back over to banks in the republic before they emigrate.
"We had a guy go through last week who had millions of debt but no property, a point noticed by the judge. I always encourage them to get rid of their properties and assets before they come over."
Thatcher said that according to his recorded figures and upcoming cases he will be helping to wipe out a total of around one billion euros of Irish debt by September this year.
Despite the temporary bankruptcy-exile Irish people can still enjoy themselves while in Britain, Thatcher added.
"For instance in a UK bankruptcy you are allowed to hold onto £70 for a holiday per month so there is money there to fly home to Ireland when you want to see the family. No one says you have to spend all your time in the UK."
"Mary" meanwhile said she was unmoved by suggestions that she and others engaged in bankruptcy-emigration would end up busting Irish banks.
"The way I see it the Irish banks got their bail out from the taxpayer, Europe and the IMF. This is our bail out, this is our way of rebuilding our lives."
Steven Thatchers's seven steps for Irish bankruptcy immigrants
Step 1: You make the decision to temporarily emigrate to the UK in face of mounting debt in Ireland

Step 2: You hand back the keys of properties and other assets to banks, building societies, financial institutions in the Irish Republic.

Step 3: You move to Britain and establish a COMI – a centre of main interest where you rent property, register to vote, create an address for utility bills, find work etc.

Step 4: Through you fill in a 26-page form applying for to be bankrupt in the UK. This can be done at least after six months of residency at a COMI in the UK.
Step 5: You must remain in the UK for up to nine months or beyond to secure your bankruptcy order.

Step 6: Through county courts the service takes through the process which is some cases has been a formality lasting up to 35 seconds in a rubber-stamping exercise.

Step 7: After residing as a bankrupt in the UK for nine months or more you can return to the Republic of Ireland fully protected in terms of your debts being written off. You may not be able to open a bank account in Ireland for up to 12 years under the current regime but there is nothing to stop you opening up a parallel account in the UK after only 12months in financial purdah, an account whose funds you can draw from while in Ireland

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