EU bankruptcy tourists and debtors seek UK bankruptcy help

bankruptcy help

Between 2006 and 2007, English bankruptcy judges started noticing that increasing numbers of individuals from Germany were entering the UK seeking bankruptcy help from the Courts in England. This led to the coining of the term ‘bankruptcy tourism’. In our days consumers and businesspeople from Latvia, Lithuania and even Russia are free to use UK bankruptcy help.

 One year bankruptcy term helps UK-based businessmen and consumers resolve their debt problems

To avoid the dotcom crash that took place between 2000 and 2001, there was a change in the Enterprise Act of the United Kingdom to avoid seeing hundreds of business people failing as had happened. This had left business persons penniless; being bankrupt meant that none of them could venture into a new business as a director for a minimum of three years.

The Enterprise Act is credited with bringing bankruptcy discharge period to just 12 months from three years. As a result, England and Wales immediately became attractive for businesses and individuals who were in dire financial straits, seeking bankruptcy advice and help across Europe.

By changing the law, the Government wanted to modernise the UK economy to allow small businesses and entrepreneurs to rise again after an initial failure in a more efficient way. In contrast with the USA bankruptcy laws, the UK regulations looked a bit harsh and a new dimension needed to be carved out; the legal framework had to be moved from being a punishment against business creators and innovators for initial failure but to encourage them to try again. This led to the changes in the Enterprise Act.

 “Bankruptcy brothel of Europe” offers UK bankruptcy help and other services to consumers and businesspeople from Germany and Ireland

Countries such as Germany were also not left out by the dotcom crash. It did affect lots of businesses and the seven year bankruptcy period in the country was a poisoned arrow in an already inflicted wound. As such, entrepreneurs and business owners from Germany started making trips to England and Wales seeking bankruptcy help from local Courts and practitioners.

“Bankruptcy brothel of Europe’ soon became the new nickname of England and the bankruptcy claims morality and genuineness were heavily questioned and criticised.

Soon the Irish followed, indebted consumers and businessmen started flocking in England and Wales as they escaped the Irish system known for its repressive bearing; while in England a person faces one year of bankruptcy, in Ireland, till the law changed in December 2013, it could be as long as 12 years.

That was around 2010 and apparently, the promise of a new rapid beginning and affordable bankruptcy help is great news not just for Germans and the Irish only but even for others in Europe, such as Latvians and Lithuanians.

How bankruptcy proceedings in England help Latvians to settle their debts?

In 2011 Andris Bruvelis was described as Latvia’s first insolvent person who has gone through bankruptcy in the UK. His debts were about 95000 euros in total, which was made up of a mortgage and consumer loan in Latvia and a British car loan.

At first, Andris had tried to negotiate with banks to reach agreements that would see him repay them if the monthly rates of payment would just be reduced somewhat. Considering the Latvian bankruptcy laws remained harsh on a person like him, Andris sought bankruptcy help in England in 2011. After successful bankruptcy order, the only thing that he lost was an apartment in Latvia.

Read more about how Latvian consumers benefit from accessing UK bankruptcy process in our article “More Latvians using UK bankruptcy help

What information and documents will help you to file for bankruptcy in England?

With your bankruptcy application, in some instances, the bankruptcy adjudicator may ask you to provide the evidence of your residence, work, business or study in England or Wales during the last six months or longer.

The evidence may include an explanation of why you relocated to England or Wales, an explanation of what action you have taken to inform your creditors about your relocation, copies of utility bills (gas, telephone, water, electricity, council tax) for the last 6 months or from the date you relocated to England or Wales.

If you have dependants who don’t live with you, for example your underage children and spouses, you would need to explain why this is the case. It’s important to prepare details of your each visit away from England and Wales in the last 12 months. It would be an advantage if you could also provide:-

  • Copies of tenancy agreements and bank statements
  • Copies of credit card and personal loans statements
  • Documentation showing your employment or self-employment
  • A copy of your national insurance number and correspondence with HMRC and other UK-based government and non-government institutions such as schools, colleges, universities
  • Evidence of registration with a GP (local doctor) and dentist
  • Copies of any bills and contracts relating to your mobile phone and telephone
  • Any other information and documentation which you believe shows that your centre of main interest is in England or Wales.

Read more on UK bankruptcy disadvantages in our article “Bankruptcy UK — what does it mean for you?”

 Are you protected from creditors in your home country, for example in Latvia, Lithuania or Russia, if you are made bankrupt in the UK?

In case of a successful UK-made bankruptcy order, insolvent people from Latvia, Lithuania and other EU countries (except Denmark) could achieve substantial protection from their creditors’ debt recovery and debt enforcement actions. Latvians, Lithuanians and other people across Europe are currently enjoying their freedom to choose where to go bankrupt under the EC Insolvency Regulation 1346/2000 and the new, updated EC Insolvency Regulation 2015/848.

People with debts originated outside of the EU, for example in Russia, may also rely on some protection against their creditors.

In case JSC Bank of Moscow v Kekhman & Ors [2015] EWHC 396 (Ch), Mr Kekhman, a Russian national shopped for the best jurisdiction where he could declare and settled on England.

Mr Kekhman, choose a foreign country to declare due to personal bankruptcy absence in Russia and he had assets within England or within the jurisdiction where he wanted to declare bankruptcy; his lawyer also convinced him that the Russian courts would definitely acknowledge the UK bankruptcy.

Mr Kekhman had 19 creditors located in Russia with debts totalling £317 million. One of the creditors JSC Bank of Moscow demanded the repayment of $150 million in respect of damages for an alleged conspiracy to defraud. The bank felt aggrieved and sought to have the bankruptcy annulled.

The courts refused to annul it even after acknowledging that there was a little chance of having the bankruptcy order enforced or recognised in Russia.

The judge held that Mr Kekhman could show a sufficiently close connection with England and Wales, as he had a debt of £86 million to a creditor based in England under an agreement governed by English law. The fact that Russian law would not recognise Mr Kekhman’s bankruptcy did not prevent the judge from making the bankruptcy order.

This is great news for any honest foreign debtor and their bankruptcy advisors.

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