Bankruptcy tourism

By Lisa O’Carroll

NIALL is 31 and manager of a successful fruit farm just outside Dublin. He is thinking of emigrating to England — not because he is out of work but because he is so heavily in debt that he wants to declare himself bankrupt.

He bought three houses as a buy-to-let sideline between 2004 and 2006. Although he earned a modest salary of 25,000 euros a year, the banks gave him two mortgages of more than 300,000 euros and another one for more than 200,000 euros — a loan-book worth 32 times his salary. The fantasy of becoming a property millionaire did not last long and now the farm manager is in negative equity to the tune of 250,000 euros and with a glut of empty properties on the market, he has no hope of meeting monthly repayments from rent.

Declaring himself bankrupt in Ireland is not a realistic option: bankrupts must wait 12 years before they are discharged from their debts. But under European Union law he can file for bankruptcy anywhere in Europe. If he relocates to London or Manchester he can be free of his debts within 12 months, courtesy of the “progressive” UK law.

Niall’s case is far from unique. ‘Bankruptcy tourism’ is the talk of Dublin and the conversation is being held across all strata of society.

Jim Stafford, at the corporate recovery practice Friel Stafford, said: “Personal bankruptcy was virtually unheard of 10 years ago, now it’s everywhere: politicians, high-level civil servants, buy-to-let investors, doctors and lawyers.”

A chartered accountant, he advises clients to seek bankruptcy if a creditor is being vindictive and will not cut a reasonable deal; if a client in difficulty is expecting a large inheritance — “you can go to the UK, come back in 12 months and it will still be there for you; that’s a factor for some people” — or if a client has a large pension, because a pension is not included in the estate divided up by courts in Britain, whereas it is in Ireland.

Stafford says he started getting calls about filing for bankruptcy in Britain and the US in September 2008 following the collapse of the investment bank Lehman Brothers. “The phone started hopping and it hasn’t stopped since.”

There are no official statistics on how many Irish are relocating to Britain — the courts do not document this — but there have been a few high-profile cases including that of the Cork-based property developer John Fleming. He and his construction firms owed one billion euros to the banks and in December it emerged that he had relocated to Billericay in Essex and filed for bankruptcy.

Figures released this week show that as few as 29 people (including Sean FitzPatrick, the former head of the Anglo-Irish Bank) were made bankrupt in Ireland last year, demonstrating how unattractive bankruptcy in Ireland is. This compares with the 79,000 people in Britain who were made bankrupt last year.

Going to Belfast to file for bankruptcy is also an option but the solicitor Toby McMurray, who briefed clients at William Fry, said it risked social stigma.

— The Guardian, London