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Uk Could Face Wave Of Bankruptcy Tourism

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UK could face wave of bankruptcy tourism

The UK is at risk of bankruptcy tourism as indebted people turn to Britain to take advantage of its leniencey, an insolvency expert claims.

The practice, termed 'forum shopping', involves potential bankrupts from other European countries setting up a temporary address in Britain and filing for bankruptcy here, where they may be debt-free after only one year.

The UK's leniency is highlighted by comparison to the penalty period in Germany of seven years and in Ireland of 12 years.

EU rules mean any bankruptcy ruling in the UK must be recognised by the other countries in the European Union. This allows a foreigner becoming bankrupt in the UK to benefit from the one-year rule on return to their own country.

In the year to March, 59 foreigners filed for bankruptcy in the UK after residing here for less than 12 months, where all or most of their debts were abroad, according to figures obtained by This is Money from the Government-backed Insolvency Service.

But Neil Smyth, insolvency expert and partner at law firm Taylor Wessing, believes the figures for forum shopping will rise as the recession wears on, driving up the cost of bankruptcy for genuine debtors in the process.

Of the 59 foreigners filing for bankruptcy after less than 12 months of residence, 21 were found to be a fraudulent and the Insolvency Service has so far had seven of these annulled.

Despite the small numbers involved relative to the number of people filing for bankruptcy in the UK – almost 19,000 people went bankrupt between April and June this year – Smyth believes this could be the tip of a potential iceberg.

Mr Smyth said: 'This problem can only get worse with time as more and more people become unemployed across Europe and realise the disparity in bankruptcy laws between member states.

'We have even heard about companies setting up in Germany that set clients up with a temporary address and help them to jump through the various hoops to become bankrupt over here.'

Bankruptcy currently involves a £150 court fee and a £360 paid to an 'official receiver', who handles all the paperwork and investigations pertaining to each case. However, the costs of investigation is much higher when involving a foreign bankrupt as foreign assets and creditors need to be assessed.

Mr Smyth's explanation is supported by a report on the Insolvency Service's website, which states debtors may use addresses 'supplied by agents assisting with the petition for bankruptcy'.

This means foreign bankrupts may be able to file for bankruptcy in Britain, as all they have to prove is that their 'centre of main interests' is in the UK. This may mean proof of an address used several times a year, that the majority of a person's business activities are in the UK or the majority of their creditors are here.

Ahh yes, Gordon's 'light touch' regulations. Instead of ushering in a new era of global hedge funds to the city, we've brought in international companies to declare insolvency.

Anybody else think that it is time for Gordon to go?

Gordon%20Brown%20Flush%20not%20Flash.jpg

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Bankruptcy currently involves a £150 court fee and a £360 paid to an 'official receiver', who handles all the paperwork and investigations pertaining to each case.

Bankruptcy surely means you have no money. Nothing. So where do you get £510 from?

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UK could face wave of bankruptcy tourism

Ahh yes, Gordon's 'light touch' regulations. Instead of ushering in a new era of global hedge funds to the city, we've brought in international companies to declare insolvency.

Anybody else think that it is time for Gordon to go?

Gordon%20Brown%20Flush%20not%20Flash.jpg

It wasn't lack of regulation, i.e. too few laws and government bureaucrats dictating to business, that got us into this mess.

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Bankruptcy surely means you have no money. Nothing. So where do you get £510 from?

Standard practice is to stick it on a credit card...

:lol:

Actually, bankruptcy doesn't mean you have no money; it means that you are unable to service your debt. So if you have an income of £1000 per month, legitimate living costs of £700 per month, no assets, and debt repayments of £600 per month you can go bankrupt.

All you've got to do is skip the last couple of month's repayments and you've got the £510 easily.

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Interesting to note: UK Bankrupcy numbers are feectively CAPPED as there is only a certain amount of capacity to hear and process the cases.

Oh, and their budget was cut this year.

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