“Bankruptcy tourism”, where a prospective debtor shops forums for the most favorable bankruptcy conditions is not just an American phenomenon where it has proven popular for people to own McMansions in states like Florida precisely because Florida bankruptcy law protects the lavish homes from bankruptcy trustees and creditors. Bankruptcy tourism is also proving popular “across the pond” in Great Britain.
A member of the Irish boyband Westlife, which has amassed approximately 30 million British Pounds, has declared bankruptcy because of a failed property development project. The project failed when the Irish real estate boom went bust, along with the rest of the economy.
Why did his bankruptcy draw so much attention? Because he did not declare bankruptcy in his native Ireland. Instead, he declared bankruptcy in Surrey, England. The reason why he chose to declare bankruptcy in England instead of Ireland is that in England, his debts can be discharged after one year. In contrast, in the Republic of Ireland it could take as much as twelve years to have his debts discharged.
Many have complained about the draconian Irish bankruptcy laws, and there are many wealthy Irish citizens who declare bankruptcy in the United Kingdom in order to avoid them. Amongst other wealthy Irishmen who have declared bankruptcy in the United Kingdom is John Fleming, a well-known Irish real estate developer who also ran into problems with the disastrous real estate market in Ireland. Another example is that of Irish couple Brian and Mary O’Donnell who applied for bankruptcy in England after establishing residence in Westminster. Amongst other properties, they own a Canary Wharf skyscraper worth close to 200 million Euros.
In the first three months of 2012, almost 30,000 people entered personal insolvency in England and Wales.
Even in the UK, however, the picture is not entirely rosy. Declaring bankruptcy can haunt the debtor for many years to come. It stays on the debtor’s credit history for six years. It can also harm a debtor’s chances of obtaining a mortgage in the future and can limit a debtor’s prospective career as, for example, a solicitor, banker or managing director. Bankruptcies are advertised in the UK and financial restrictions apply for a maximum of fifteen years in some cases. There really is no such thing as a free lunch in life.