Among the indebted of Germany, Austria, France and Ireland, the English insolvency laws look beautifully lenient. Insolvency experts say that the number of foreign debtors seeking bankruptcy in Britain has risen by 20 per cent.
Crippling insolvency laws in Germany mean that it takes between six and nine years to escape debts after being made bankrupt. A bankrupt in Ireland will normally remain an “undischarged bankrupt” for 12 years, maybe longer. However, in this country a bankruptcy can end in as little as 12 months.
Observers are calling the phenomenon “bankruptcy tourism”. The Insolvency Service confirmed that it had identified dozens of cases of people from Europe filing for bankruptcy after appearing to have been resident here for less than 12 months with all or most of the debts being owed to creditors outside Britain
In 2002, new European insolvency legislation came into force that made cross-border bankruptcies between member states easier to complete. The regulation covers personal as well as corporate insolvencies and, in theory, allows individuals saddled with debt to “shop around” for the most lenient bankruptcy jurisdiction within the Union.
Under the current system, there is no minimum time limit for a foreign national to be resident and “economically active” in England and Wales before petitioning for bankruptcy. However, the Government closely scrutinises applications from people who have been resident for less than 12 months. Being economically active includes being employed or having a source of income, owning a bank account, having a national insurance number or paying rent.
More than 60,000 people in England and Wales were made bankrupt in the past financial year. The Insolvency Service says that foreign nationals account for only a small percentage of this figure.
Firms are flocking to “bankruptcy brothel" Britain to take advantage of administration laws. A greek multinational company has deprived creditors of £1.3bn by claiming that a one-man London office was its global headquarters and exploiting lenient insolvency rules introduced by Labour. It was reported in the Times that a large foreign telecoms company, moved its assets to Britain from Mainland Europe in August. Its tiny London head office consisted of one man, one desk and a computer.