United Kingdom experiences rise in bankruptcy tourism
In times of economic difficulty, people are trying to find ways to stay financially afloat. The United Kingdom has been hit hard, but its neighbour Ireland has been hit even harder.
In comparison to England, Irish bankruptcy laws are extremely tough as they leave their subjects under financial limitations for 12 years, compared to England where bankruptcy is discharged after one year. This tough regime has led to an increase in Irish people engaging in so-called bankruptcy tourism. This is a phenomenon under which nationals of one country temporarily move to another with softer bankruptcy laws.
Who are the Irish bankrupts temporarily fleeing Ireland?
Many of those trying to leave often had their capital invested in, for example, properties which more or less lost their value during the crisis. As such, many of those filing for bankruptcy outside of Ireland were previously successful businessmen and property investors.
Some companies are openly advertising to attract such clients, and advise them to simply leave Ireland and any properties behind. Before filing for bankruptcy the clients will typically hand over any keys to mortgaged properties to the relevant building society or bank and then temporarily move to the UK.
Previously wealthy individuals who have opted to leave Ireland in order to declare bankruptcy outside the country’s borders include David Drumm, former Chief Executive of the bank Anglo Irish, who was declared bankrupt in England. In Northern Ireland, Sean Quinn, once considered to be Ireland’s richest man, who was declared bankrupt at the end of 2011.
Can people just run away from their debts?
To some extent the system allows for Irish people to find a quick way out of their stressful situation - if they can afford to. They can then return to Ireland and start their lives again, sooner than if they stayed in Ireland. However, there is a clear division here between those who can afford to leave the country and those who can’t.
It would also be a mistake to think that it would be unproblematic to return to Ireland. Even if you have been discharged from bankruptcy, doing everyday things such as setting up a bank account in Ireland might be a struggle.
Are harsher punishments better or worse?
Many entrepreneurs, together with other professionals, have stressed that the long-term consequences of being declared bankrupt in Ireland are hindering the country’s growth. These are matters that should preferably be dealt with by national courts. After all, not everyone will be able to move across the borders, rent a household and get professional help to file for bankruptcy.
Ireland’s current bankruptcy laws encourage emigration, which is taking these entrepreneurs out of the Irish economy for a certain period of time which can only be bad for the Irish economy. Hopefully Ireland will soon change its laws. After all, one of the terms of the IMF bailout granted to Ireland was that it would restructure its bankruptcy laws.
Numbers show that whilst the number of people being declared bankrupt in the UK annually can easily reach over hundreds of thousands, the number in Ireland can stay well below 50. This discrepancy highlights the massive difference between the two countries’ bankruptcy laws and adds an interesting dimension to the economic situation.
- Last Updated on 08/10/2012
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