Bankruptcy Tourism
Bankruptcy tourism or forum shopping gained notoriety out of the great recession as people desperately tried to rid themselves of their unsustainable debts. Bankruptcy tourism or forum shopping is generally prohibited and can be defined as when a person attempts to set up temporarily in a different legal jurisdiction for the sole reason of availing of that jurisdiction’s legal system or improving their legal position.
The European Union is a single market that seeks to guarantee the four freedoms i.e. the free movement of goods, capital, services, and labour. Every member state of the European Union must allow for the four freedoms. Therefore a citizen of one member country has the right to live and work or establish their business in another member state. By doing so, that citizen is establishing their centre of main interest (COMI) and can avail of the laws of that member state.
A person’s centre of main interest (COMI) becomes relevant if they wish to avail of insolvency solutions in that member state. This became particularly relevant in Ireland during the property crash and great recession from 2008 to 2013. Ireland’s bankruptcy laws were antiquated with a twelve year discharge period as opposed to a one year discharge period in the UK. This led to many Irish people emigrating to the UK and Northern Ireland for the purpose of declaring bankruptcy. The most famous of those was the business tycoon and once billionaire, Sean Quinn. His bankruptcy in Northern Ireland was annulled on the basis that he had not properly established his centre of main interest (COMI).
The Personal Insolvency Act 2012, reduced the discharge period from bankruptcy to three years and the Personal Insolvency Act 2015 further reduced the discharge period to one year. This brought Ireland’s insolvency laws in harmony with the UK. Alongside the UK, Ireland now has one of the most forgiving bankruptcy regimes in the European Union. The flood of Irish citizens availing of UK bankruptcy stopped.
However, a lot of people may be surprised to hear that Irish people were not the only European citizens forced emigrate due to outdated laws. Many German citizens also travelled to England so that they could avail of the forgiving bankruptcy regime in order to accelerate and secure their financial future. In fact, at the height of the phenomenon, The Telegraph declared that Royal Tunbridge Wells in Kent was the capital for bankruptcy tourism among German and Austrian professionals.
Times Change
As the political landscape of Europe continues to experience an unexpected transformation, so too do trends in bankruptcy law. Ireland’s economy has begun to recover and our bankruptcy procedures have been reformed. However, while Germany has also pushed to bring their financial courts up to contemporary standards they still have not reduced the discharge period from bankruptcy. Add to this the enormous ramifications of Brexit and you’ll begin to see how German bankruptcy in Ireland is poised to become the next new topic in Irish courts.
Anthony Joyce & Co. has been at the forefront of bankruptcy discussion and calling for reform, so as you can imagine we have strong opinions and expertise to offer. If you’re a German or Irish resident who would like to seek experienced bankruptcy advice, make sure to contact our team. In the meantime, join us as we outline exactly why Ireland is the ideal spot for German citizens to move their centre of main interest (COMI) to Ireland and obtain the benefits of bankruptcy in Ireland.
German Bankruptcy Law and Ireland
The UK and now Ireland have adopted the American ideology of forgiveness regarding debt. The focus is on allowing the unlucky debtor to get back into business again. While Germany attempts to play catch-up, their laws are still weighed in favour of the creditors.
The time it takes to complete the process in Germany is much longer than what we have here. As such, the costs incurred can be much greater and the option of going through bankruptcy in Ireland becomes much more appealing. New insolvency legislation is supposedly in the pipeline for Germany, but often the conversation is stalled by disagreements over whether certain tax claims should receive priority status.
In the meantime, many people seeking to start a new life are either forced to wait or seek a fair solution abroad.
Brexit’s effect on German Bankruptcy Trends
Brexit is a game changer for German citizens considering bankruptcy tourism in the UK. If the UK leave the European Union a German citizen may not be entitled to the benefit of Article 3(1) of Council Regulation (EC) No 1346/2000 whereby their debts are cleared and their bankruptcy is recognised throughout all the member states (excluding Denmark).
A German citizen could move to the UK to attempt to set up their centre of main interest in the UK but then discover that the legal system has changed and their German debts are not cleared. As explained previously, it takes time to establish your centre of main interest (COMI) i.e. “the greater part of six months” and therefore any person considering moving to the UK should think again. Ireland is therefore the best place in Europe to consider moving to offer German citizens a quick and easy solution to declare bankruptcy and resolve their debts.
Declaring Bankruptcy in Ireland
Declaring bankruptcy is never an easy choice, no matter what country you decide to do it in. Before you take the steps of moving to a new country, be sure to consider what other insolvency options are available. You might be able to agree on an alternative solution with your creditors or to create a payment plan that will allow you to pay your debts over a more reasonable period. That said, when you have the opportunity to undergo a fair and efficient process that allows you to get back to business and living a normal life, it can often be the best solution available to you.
Irish Bankruptcy law will allow a German national to complete their bankruptcy procedures in a mere year once they have been resident in the country for a certain amount of time. A good German bankruptcy solicitor will be able to advise on whether it’s the best option available and explain exactly how you will benefit in the years to come. The sooner you begin investigating the possibility, the sooner you’ll be able to decide what to do.
Our team are ready to talk all about German citizens declaring bankruptcy and other personal insolvency solutions available to German citizens hoping to resolve their debts in a timely fashion. So when you’re looking to get things back on track, make sure to get in touch.
