Bankruptcy in the UK can end in twelve months and usually does.
The UK has an array of insolvency procedures that enable a debtor to avoid bankruptcy. These include Individual Voluntary Arrangements (debts over £15,000) and Debt Relief Orders (debts of less than £15,000).
An Irish citizen can avail of the UK’s bankruptcy regime and of other insolvency solutions there under EU law. European regulations permit the insolvency legislation of one member state to apply in another subject to certain provisos. One of the features of cross-border insolvency is that debtors may seek to open proceedings in another state of the EU which has insolvency legislation more favourable to their particular circumstances than they could hope to attain in their own ‘home’ jurisdiction. This phenomenon is sometimes referred to as “forum shopping”. The result is that a debtor who lives in any member state may be able to put forward an Individual Voluntary Arrangement or petition for bankruptcy or indeed pursue some other legal solution to their debt problems in the UK – provided that the UK is their “centre of main interests”. The definition of the term “Centre Of Main Interests” or COMI is of course key to the matter. There is no definition of COMI except that the relevant EU Regulation states that “the centre of main interests should correspond to the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties”
Changing one’s COMI can be as simple as going to live and work in the UK for say six months or more. It doesn’t matter that one’s creditors are all located in Ireland except of course that in an Individual voluntary Arrangement the creditors can vote to reject the proposal. This doesn’t apply in bankruptcy.
The cost of bankruptcy in the UK is about £600 compared to up to £30,000 in Ireland.
The contrast in time and cost between the UK (England, Wales & Northern Ireland only) and Ireland is reflected in the numbers applying for bankruptcy in the two jurisdictions: in the UK over 48,000 bankruptcy orders were made in the UK in the first nine months of 2010 whereas less than 20 were made in Ireland. If you add in the figures for Scotland where the legislation is slightly different (almost 16,000 total personal insolvencies) and the figures for Individual Voluntary Arrangements (almost 39,000) and Debt Relief Orders (19,000) the contrast is even more startling.
In the USA there are two distinct bankruptcy procedures for personal insolvency: Chapter Seven which is somewhat similar to bankruptcy in the UK (discharge within six months possible) and Chapter Thirteen which is broadly similar to an Individual Voluntary Arrangement in the UK. While the rules for these two solutions differ from state to state somewhat, the philosophy underlying them has a strong element of debt forgiveness and the idea of giving the bankrupt person a fresh start, thus encouraging a culture of entrepreneurship. In Ireland the underlying philosophy is to punish, embarrass, shame and stigmatize the victim of insolvency. An Irish High Court Judge has stated that ‘Bankruptcy carries with it enormous penal and prejudicial implications for the person affected, be he a public representative, businessman, director of a company, member of an association or even a person who has to seek employment or endure social or other opprobrium as a consequence of becoming bankrupt and being involved in its procedures thereafter’.