IRISH PEOPLE planning to declare themselves bankrupt in Britain can now be provided with a fake history to show they have lived there for long enough to declare bankruptcy, the Oireachtas Committee on Justice has heard.
Under European Union law it is possible to file for bankruptcy anywhere in Europe so there has been a growing interest in the possibility of relocating to Britain, where bankrupts can be free of their debts within 12 months, rather than the current 12-year period in this State, which is soon to be reduced.
To avail of the British option, it must be shown to have been the centre of main interest for about six months before bankruptcy.
Bill Holohan of the Irish Society of Insolvency Practitioners told the committee there were “service providers” that would provide this documented history of living in Britain, for a fee.
However, Pat Farrell of the Irish Banking Federation said the idea of bankruptcy tourism was “a red herring” and people were not running “willy-nilly” across the Border to become bankrupt. He said it was being suggested that banks were doing nothing to help borrowers in trouble, yet they had restructured 70,000 mortgages.
The committee was hearing submissions on the Personal Insolvency Bill which is being proposed by Minister for Justice Alan Shatter. It cuts the period of bankruptcy from 12 years to three years. However, it also proposes that the court may have the discretion to make an income payments order for up to five years after the bankrupt is discharged.
Mr Holohan said there should be a clean break after the three-year period had elapsed, with no “cat-and-mouse clause” of dipping into post-bankruptcy income.
Paul Joyce of the Free Legal Advice Centres also rejected the five-year clause, describing it as “completely arbitrary and unfair”.
He expressed concern about a requirement in the Bill that debt-settlement and personal insolvency arrangements carry the approval of a significant number of creditors.
“There is no way of telling at present whether creditors will act reasonably and pragmatically when proposals from personal insolvency trustees are made so simply we are being asked to suck it and see,” Mr Joyce said.
Ross Maguire of the New Beginning group said there was “a very strong concern” the banks would not agree to reasonable offers of debt settlement or personal insolvency arrangements.
He called for a mechanism which would allow for “a declaration of unreasonableness” against an unco-operative lending institution, which could be taken into account by the courts.
Meanwhile, the Money Advice and Budgeting Service (Mabs) warned that some lending institutions might take pre-emptive action to have the debts owed to them fast-tracked into court, to avoid having them included in debt settlement when the legislation is passed.
Yvonne Bogdanovic of Mabs said steps should be taken to deem any such action null and void.
The committee also heard examples of hardship, including one case where a couple who were expecting their second baby had both lost their jobs.
Mr Holohan said they had sold their house and car and were being “hounded” by the lending institution for the remaining debt of more than €100,000. They were now seriously considering going to Britain and throwing themselves on the mercy of the social welfare system, he said.
