By Steve Thatcher of Help With Debt
Here is the new proposed amendment.
Head 125 – Amendment of section 85 of Bankruptcy Act 1988 (as inserted by the
Civil Law (Miscellaneous Provisions) Act 2011)
Provide for the substitution of the section 85 (as amended) with the following text.
Automatic discharge from bankruptcy
Provide that
85 (1) Every bankruptcy shall, on the 3rd anniversary of the date of the making of the
adjudication order in respect of that bankruptcy, unless prior to that date the
bankruptcy has been discharged or annulled, stand discharged.
(2) Any bankruptcy subsisting at the commencement of this Act where the order of
adjudication in respect thereof was made before 3 years prior to the date of
commencement, is hereby discharged
(3) The bankrupt’s unrealised property shall remain vested in the Official Assignee
after discharge from bankruptcy.
(4) The bankrupt shall after discharge from bankruptcy have a duty to cooperate with
the Official Assignee in the realisation and distribution of such of his or her property
as is vested in the Official Assignee.
(5) The court shall, on application to it, have discretion to make and vary an order
requiring the discharged bankrupt to make payments from his or her income to the
Official Assignee or any other trustee for the benefit of his or her creditors for a
period lasting up to 5 years from the date of the discharge of the bankruptcy.
(6) In making the order under subsection (5), the Court shall have regard to the
reasonable living expenses of the bankrupt and his or her family and for that purpose,
the Court may have regard to any guidelines on reasonable expenditure and essential
income for debtors published by the Insolvency Service pursuant to Head 132 of this
Act.
(7) A person whose bankruptcy has been discharged by virtue of this section may on
application obtain a certificate of discharge under the seal of the Court.
(8) In this section "bankrupt" includes personal representatives and assigns.
I am not sure how many of you have seen the new amendments, but they are as above.
The key points are that you will now get an automatic discharge after 3 years instead of 12.
Any unrealised property remains vested in the Official Assignee after discharge
There is the ability for someone to make an apllication to the court for an order that payments be made for five years.
Questions which immediantly arise are:-
1. How long after discharge does un realised property remain vested in the assignee. We had this situation here in the UK. It used to be the case that if a house or pension wasn't dealt with and realised, it was filed in the Protracted Realsisations Unit. I dealt with cases whereby 20 years after a bankruptcy had ended we had the right to force a sale of a property whih now had lots of equity.
If this is the same here and there are no time constraints mentioned, it could be the case that in 20 years the Assignee writes to your asking for €100,000 from the equity now attached to the property.
2. Who has the right after the three year bankruptcy to apply to court for a five year payment plan. The Banks will love this. They get access to assets for three years and then if unrealised perhaps an unlimited time, and then access to any wealth you then build up for the next five years.
It seems to me that you could end up going bankrupt and yet still be on the hook for money you through you had written off for decades to come.
Where in here is the ability to write off your debts and re-start your life?
Thursday 26 January 2012
Tuesday 24 January 2012
Can I live in Eire and Go bankrupt in Northern Ireland
I am getting an increasing number of calls and emails from people asking if they can remain living in Eire and yet travel across the border to declare bankruptcy in Belfast. The short answer is no.
If you are an Irish citizen and you wish to avail yourself of the Northern Irish bankruptcy laws then the plain fact is that you must establish that your centre of main interest is in the province. This would be the same if you were moving to Liverpool for the same purpose.
It doesn’t matter that the reason that you are moving from the South to the North is simply to go bankrupt, the fact that you have relocated gives you the legal right to declare bankruptcy using EU law.
So for establishing Comi purposes you should ensure that you obtain a National Insurance number. This enables you to look for work, or work on a self employed basis. It forms the mechanism by which you will make contributions to the national insurance fund and hence latterly become entitled to benefits.
If you are living in Northern Ireland, you need to obtain accommodation. This should be at a reasonable rent and of a permanent or semi permanent basis. A six month assured short hold tenancy would be ideal.
With a place to live you need a bank account. I often recommend the Co-op but also increasingly an account which costs a small fee to administer each month but also may be easier to open.
With the bank account you can register for utilities and indeed vice versa.
With these items you are laying the ground work to showing that you have a comi in your new home.
Your bankruptcy petition asks you where you have lived for the greater part of the last six months. You therefore need to be in the address which falls in the jurisdiction of your county court for at least three months and a day before you even contemplate seeking a bankruptcy order.
Many on the net say that it must be twelve months, others six months. I have not seen any reason or explanation for these times. It may simply be that writers are churning out the same times without thought, just because someone else has quoted it.
The fact is that that if you have lived in the UK for less than 12 months, the OR can look into whether you are living here. It doesn’t mean he will. If you have settled and there is evidence of that you are entitled to present your petition to the court in which you reside after three months. From there it is all about evidence and fact.
If you are an Irish citizen and you wish to avail yourself of the Northern Irish bankruptcy laws then the plain fact is that you must establish that your centre of main interest is in the province. This would be the same if you were moving to Liverpool for the same purpose.
It doesn’t matter that the reason that you are moving from the South to the North is simply to go bankrupt, the fact that you have relocated gives you the legal right to declare bankruptcy using EU law.
So for establishing Comi purposes you should ensure that you obtain a National Insurance number. This enables you to look for work, or work on a self employed basis. It forms the mechanism by which you will make contributions to the national insurance fund and hence latterly become entitled to benefits.
If you are living in Northern Ireland, you need to obtain accommodation. This should be at a reasonable rent and of a permanent or semi permanent basis. A six month assured short hold tenancy would be ideal.
With a place to live you need a bank account. I often recommend the Co-op but also increasingly an account which costs a small fee to administer each month but also may be easier to open.
With the bank account you can register for utilities and indeed vice versa.
With these items you are laying the ground work to showing that you have a comi in your new home.
Your bankruptcy petition asks you where you have lived for the greater part of the last six months. You therefore need to be in the address which falls in the jurisdiction of your county court for at least three months and a day before you even contemplate seeking a bankruptcy order.
Many on the net say that it must be twelve months, others six months. I have not seen any reason or explanation for these times. It may simply be that writers are churning out the same times without thought, just because someone else has quoted it.
The fact is that that if you have lived in the UK for less than 12 months, the OR can look into whether you are living here. It doesn’t mean he will. If you have settled and there is evidence of that you are entitled to present your petition to the court in which you reside after three months. From there it is all about evidence and fact.
Being Irish and Going Bankrupt in the UK is a reality
I have being taking people through the bankruptcy process here in England and Wales for nearly 20 years. The process is now very streamlined and I have relationships across the country with court clerks that helps make the whole experience as painless as it can be for the individual going bankrupt.
I have recently become interested in helping those from Eire follow the same route. It is clear even from cursory reading that going bankrupt to get rid of your debt is simply not an option. It is a 12 year process, and even then you have to apply to be released which may happen more by luck than design. There are moves afoot which will allow a bankrupt to apply for discharge after 5 years, but even that seems to be a penally long time.
Here in England a person is generally automatically discharged from bankruptcy after 12 months. Additionally it is also the right of any EU citizen to apply for bankruptcy in any other EU member state. In order to do that there is a test which is applied. A person must show that their centre of main interest is within the state where they are declaring bankruptcy even if their debts may be incurred elsewhere in Europe.
I have written before about establishing this centre of main interest (COMI). Senior UK Judges have made it clear that it doesn’t matter that you settle here for the reason of going bankrupt. It only matters that at the time your petition is filed your centre of interest is genuinely here.
Essentially that means that you have somewhere genuine to live, and that you either are working here or are looking for work, and hence you will also need a National Insurance number. To work or get benefits you will need a bank account. All this takes time and commitment. Consider the alternatives. A few months living in another country to wipe of all your debt, or a lifetime with that debt.
I am now in an arrangement with a company that helps relocate those seeking to establish their COMI in England.
Establishing your COMI is not as hard as you may have read on the internet. If you are determined to wipe off your debt and start again, you must take appropriate advice. Why not start today. I look forward to taking your free call.
I have recently become interested in helping those from Eire follow the same route. It is clear even from cursory reading that going bankrupt to get rid of your debt is simply not an option. It is a 12 year process, and even then you have to apply to be released which may happen more by luck than design. There are moves afoot which will allow a bankrupt to apply for discharge after 5 years, but even that seems to be a penally long time.
Here in England a person is generally automatically discharged from bankruptcy after 12 months. Additionally it is also the right of any EU citizen to apply for bankruptcy in any other EU member state. In order to do that there is a test which is applied. A person must show that their centre of main interest is within the state where they are declaring bankruptcy even if their debts may be incurred elsewhere in Europe.
I have written before about establishing this centre of main interest (COMI). Senior UK Judges have made it clear that it doesn’t matter that you settle here for the reason of going bankrupt. It only matters that at the time your petition is filed your centre of interest is genuinely here.
Essentially that means that you have somewhere genuine to live, and that you either are working here or are looking for work, and hence you will also need a National Insurance number. To work or get benefits you will need a bank account. All this takes time and commitment. Consider the alternatives. A few months living in another country to wipe of all your debt, or a lifetime with that debt.
I am now in an arrangement with a company that helps relocate those seeking to establish their COMI in England.
Establishing your COMI is not as hard as you may have read on the internet. If you are determined to wipe off your debt and start again, you must take appropriate advice. Why not start today. I look forward to taking your free call.
Bankrupcy and a Trustee's Interest in the Matrimonial Home
One of the criticisms of the old insolvency regime was that a Trustee in Bankruptcy (“the Trustee”), who had failed to immediately realise his or her interest in a Bankrupt’s family home, was able to recover this interest several years after the date of discharge of the Bankruptcy Order. In most cases, this interest would have increased substantially in value due to recent spiralling property prices. Amendments introduced by the Enterprise Act 2002 seemed to address the balance more in favour of the Bankrupt. Section 261 of the Enterprise Act 2002 amended the Insolvency Act 1986 (“the Act”) by adding a new Section 283A, which came into force on 1 April 2004. Under this new provision where a Bankrupt, who at the time of his Bankruptcy, had an interest in a dwelling house that is a sole or principal residence of the Bankrupt, or the Bankrupt’s spouse or former spouse, then his or her Trustee must have taken specified steps to realise the Bankrupt’s former interest in this property within three years of the date of the Bankruptcy Order. If the Bankrupt fails to disclose to his Trustee or the Official Receiver his interest in property within three months commencing from the date of the Bankruptcy Order, then the three year time period shall not run until the Trustee or Official Receiver is notified of the Bankrupt’s interest.
The specified steps that the Trustee must take are as follows:-
1. realise the Bankrupt’s former interest in the family home; or
2. apply for an Order for possession and/or sale of the family home; or
3. apply for an Order under Section 313 of the Act for a charge on the family home for the benefit of the Bankrupt’s estate; or
4. reach an agreement with the Bankrupt that the Bankrupt shall incur a specified liability to his estate in consideration that the family home shall cease to form part of the estate.
If the Trustee fails to take any of the above steps within the stipulated time period, then the Bankrupt’s former interest will automatically re-vest in the Bankrupt on the expiry of that time limit. Section 283A(6) of the Act does allow a Trustee to apply to Court to extend the three year period in such circumstances as the Court thinks appropriate. Consequently, it is essential that the Trustee does not delay in obtaining the necessary information to ascertain whether he or she has an interest in the Bankrupt’s family home.
ASCERTAINING WHETHER THE TRUSTEE HAS A BENEFICIAL INTEREST IN THE BANKRUPT’S FAMILY HOME
(i) Property held in the sole name of the Bankrupt
If the legal title to the family home is held in the sole name of the Bankrupt, then there is the presumption that the entire beneficial interest in the property was owned solely by the Bankrupt. Upon the Trustee’s appointment, the Bankrupt’s legal and beneficial interest in the property vests in the Trustee. However, the above presumption is rebuttable and not withstanding the fact that the property was purchased in the full name of the Bankrupt, it may in reality be held on trust for other beneficial owners. Often in the case of the family home, the Bankrupt’s spouse or partner (“Non-Bankrupt Party”) will have beneficial interest in the family home on the basis of his or her contributions to the purchase of the home. The nature and extent of the Bankrupt’s beneficial interest in the property will depend upon whether the Bankrupt and Non-Bankrupt Party had a common intention before or at the time the property was purchased to share the beneficial interest in the home. This common intention or agreement may be expressed in writing, such as a declaration of trust, orally or in some circumstances will exist by implication. Provided that the Non-Bankrupt Party claiming an interest in the property is able to show that he or she acted to their detriment in reliance on this agreement, then a beneficial interest under a constructive trust arises. However, even if a common intention is not established, provided that the Non-Bankrupt Party claiming an interest in the family home is able to prove a contribution to the purchase price, a resulting trust may be imposed. (see Lloyds Bank Plc –v- Rosset [1991] 1 AC 107).
(ii) Express Constructive Trust
When faced with a Non-Bankrupt Party seeking to assert his or her interest against the family home, the Trustee firstly needs to establish whether there is an expressed declaration of trust confirming that the beneficial ownership of the property is to be shared. The declaration of trust may be set out in the transfer, such as the Land Registry transfer form “TR1”, which is filed at the Land Registry or a formal declaration of trust may have been drawn up at the time the family home was purchased. A written declaration of trust is generally considered to provide conclusive evidence of the parties intention. More often than not, the co-owning parties claim that the common intention to share the beneficial interest was expressed orally but they must show that the Non-Bankrupt Party acted to his/her detriment relying upon this oral agreement.
(iii) Implied Constructive Trust
If there was no express agreement, the Courts may infer that the Non-Bankrupt Party was intended to have a beneficial interest deriving from the conduct of the Non-Bankrupt Party, such as a direct or indirect contribution to the purchase price of the property or payments towards the mortgage, provided always that this express or implied intention was coupled with the Non-Bankrupt Party acting to his/her detriment in reliance on the common intention. Examples of both direct and indirect contributions and detrimental reliance which have been held by the Court gives rise to a beneficial interest include:
1. payments towards the deposit on a property;
2. mortgage repayments;
3. expenditure incurred in improving the property which is not limited to mere maintenance;
4. substantial contributions to the parties household expenses, allowing the legal owner of the property to make the mortgage payments (see Grant –v- Edwards [1986] 1 Ch 638);
5. payments made into a joint account used to fund the mortgage and household expenses;
Even undertaking physical labour on substantial renovation works may be treated as giving rise to an interest (see Eves –v- Eves [1975] 1 WLR 1338).
(iv) Resulting Trust
Even if there were no express or implied agreements as to the sharing of the beneficial ownership of the property, the Non-Bankrupt Party may be able to establish that he/she has a beneficial interest in the family home held under a resulting trust in the absence of any evidence to the contrary. For a resulting trust to be imposed, there must have been a direct contribution to the purchase price of the property by the Non-Bankrupt Party, such as a payment towards the deposit, or the legal or conveyancing expenses incurred in purchasing the property or a contribution towards the mortgage repayments. In some cases, it may be possible to argue that a resulting trust does not arise, if there is evidence indicating that the direct contribution to the purchase price was in reality a gift or a loan. This is referred to as a “Presumption of Advancement” (see Gissing –v- Gissing [1971] AC 886) but this presumption does not apply as between unmarried parties or to transfers by a wife to her husband.
(v) Property in sole name of Non-Bankrupt Party
The above principles apply even if the family home is registered in the sole name of the Non-Bankrupt Party. The Trustee may be able to establish that the Bankrupt had a beneficial interest in the family home based on direct or indirect contribution to the purchase price of the property by the Bankrupt. The Trustee will also need to consider whether the Bankrupt has transferred any interest that he may have had in the property to the Non-Bankrupt Party or a third party at an undervalue, contravening Section 339 and/or 423 of the Insolvency Act 1986. Often it is the case that the Trustee has an uphill struggle in establishing a resulting or constructive trust in such cases since the parties are unlikely to assist him or her in establishing a common intention to share the beneficial ownership.
(vi) Property held in joint names
Nowadays it is more common for properties to be jointly owned by spouses or co-habiting parties. Where the legal title to a property is held in joint names, then in the absence of evidence to the contrary, there is a presumption that the beneficial interest in the property is shared equally between the parties.
EQUITABLE ACCOUNTING
Once the Trustee has ascertained the extent of the Bankrupt’s former interest in the family home, he may then need to take an equitable account between the beneficial owners. Equitable accounting principles allow the Court to take an account of expenditure incurred on the property to establish whether one co-owner has contributed more than his/her fair share towards the value of the property. This account does not alter the extent of the beneficial shares but determines the amount for which a co-owner should give credit to another co-owner in respect of expenditure incurred on the property. As confirmed in the case of Re Pavlou [1993] WLR 1046, the guiding principle is that a co-owner cannot take the benefit of an increase in the value of a property without making an allowance for what has been spent on the property by the other co-owner to obtain this increase.
(i) Mortgage Capital Repayments
In the case of Re Pavlou, the family home was in the joint names of the husband and wife. The marriage broke down and the husband left the home. The wife met all the mortgage payments thereafter and the husband was subsequently adjudicated Bankrupt. The wife sought credit for the mortgage capital and interest repayments. The Court held that the wife was entitled to credit for one half of the capital repayments made by the wife since she became solely responsible for the mortgage payments and not merely from the date of the Bankruptcy Order.
(ii) Mortgage Interest Repayments
With regard to mortgage interest payments, in the cases of Re Gorman [1991] ALL ER 717 and Re Pavlou, the Court directed that a separate account should (if required) be taken of mortgage interest payments by the Non-Bankrupt Party and the occupation rent owed by the Non-Bankrupt Party to the Trustee in consideration of the Non-Bankrupt Party’s sole occupation of the property or use of the Bankrupt’s/Trustee’s share of the home. In both cases it was conceded that the mortgage interest payments could be set off against an occupation rent for the period following the Bankruptcy Order. In both cases, the husband had left the home. The decisions were upheld in the case of Byford –v- Butler [2003] EWHC 1267(Ch) where the Court confirmed that where a Non-Bankrupt co-owner seeks to recover mortgage interest repayments, even where the Bankrupt has not been excluded and is still living at the property, the Trustee is entitled to set off for occupational rent against those mortgage interest payments.
(iii) Improvements
In the case of Re Pavlou, it was held that the Non-Bankrupt spouse was entitled to receive credit in respect of the costs of the improvements to the property that actually enhanced the value of the property. She was either entitled to be credited for one half of the costs of the improvement works paid by her before and after the Bankruptcy Order, that increased the value of the property or for half the increase in the value of the property which arose as a direct result of such works, which ever was the lesser.
(iv) Operation of equitable accounting
In the case of Clarke –v- Harlowe [2005] EWCH 3062 (ch) it held that equitable accounting commences at the date of separation of the co-owners. By way of background, Ms Clarke and Mr Harlowe purchased a property that was declared on the transfer to be held on trust as joint tenants. Mr Harlowe being the higher wage earner paid all the mortgage instalments and refurbishment costs to the property. Following the breakdown of the relationship the property was sold and Mr Harlowe relying on principles of equitable accounting sought a greater than 50% share of the net proceeds of sale in respect of the improvement costs paid by him.
In this particular case the arrangement between the parties was that the mortgage payments and the improvement costs were to be met by Mr Harlowe and there was no suggestion that Ms Clarke was under any obligation to reimburse Mr Harlowe for any part of these payments. The payments were in accordance with the arrangements between the parties and common purpose of the implied trust. Consequently, there was no breach or failure to comply with those arrangements on Ms Clarke’s part and equitable accounting did not operate such as to require Ms Clarke to contribute to the improvement costs from her share of the sale proceeds.
It appears from the case of Clarke –v- Harlowe that where a Bankrupt and Non-Bankrupt Party separate, resulting in one of the parties failing to discharge his or her agreed share of the property related liabilities, as a general rule equitable accounting would operate from the date of separation. However, this is not a hard and fast rule and each case would depend on the facts.
(v) Practical Steps
To avoid delay, if it is suggested that the Non-Bankrupt Party has made contributions to the mortgage, mortgage statements should be obtained from the mortgage company setting out all the capital and interest repayments from the date of the Bankruptcy Order or since the Non-Bankrupt spouse became solely responsible for the mortgage. If the mortgage is in the name of the Non-Bankrupt Party, a letter of authority should be requested from the Non-Bankrupt Party allowing the Trustee to be provided with the mortgage statements. The Trustee should also watch out for other mortgages and further advances on the family home.
When instructing a valuer in relation to improvements, the Trustee should also ask the valuer to provide an opinion as to whether the alleged renovation works improve the value of the property and, if so, by how much. The Trustee will also need to seek documentary evidence of the payments made towards the mortgage and/or renovations. It would also be sensible to check the Bankrupt’s bank account statements and PAYE slips/tax returns even if the Non-Bankrupt Party was paying all or the bulk of the mortgage, it is possible that some or all the Bankrupt’s funds were paid into the Non-Bankrupt Party’s sole account or the Bankrupt made payments to the household expenses enabling the Non-Bankrupt Party to meet the mortgage repayments.
EQUITY OF EXONERATION
In Re Pittortou (a Bankrupt) [1985] ALL ER 285, Mr Justice Scott discussed this principle by relying on the definition in Halsbury’s Laws of England, Volume 22 (4th Edition) paragraph 1071 that:-
“If the property of a married woman is mortgaged or charged in order to raise money for payment of her husband’s debts, or otherwise for his benefit, it is presumed, in the absence of evidence showing intention to the contrary, that she meant to charge her property merely by way of security, and in such case she is in the position of surety and is entitled to be indemnified by the husband, and to throw the debt primarily on his estate to the exoneration of her own.”
If the presumption is proved, then the charge will only be discharged from the Bankrupt’s share of the equity in the property. The presumption is most likely to arise in cases where the Bankrupt raises a first or second charge against the family home in order to settle his or her business debts. In Re Pittortou it was held that the equity of exoneration should apply to payments made purely for business purposes and for the Bankrupt’s sole benefit. In that case, the Bankrupt husband and Non-Bankrupt wife executed a legal charge over the property to secure the husband’s bank account which was used both in regard to his business and for payment of expenses relating to the matrimonial home. The Judge held that the payments for the joint benefit of the household should be discharged out of the net proceeds of sale from the house before division, but the equity of exoneration should apply to payments made purely for business purposes and for the husband’s sole benefit.
However, the presumption is rebuttable, particularly if it can be shown that the Bankrupt’s business borrowings were used to finance a business from which he derived an income for the benefit of his family as a whole and there is evidence that the parties did not intend that the security should fall wholly on one party’s beneficial interest to the exoneration of the other party. Nowadays it would be harder to establish the equity of exoneration where a further charge is taken out to support the Bankrupt’s business as generally the business would be for the benefit of the Bankrupt’s family and particularly where the Non-Bankrupt spouse has obtained independent legal advice before agreeing to this further charge.
THIRD PARTIES
It is often the case that third parties, i.e. the Bankrupt’s adult son or daughter claim an interest in the property for contributions that they have made to the mortgage or improvements. It is arguable that they may have acquired an interest in the property on constructive/resulting trust principles. For example, the Bankrupt may have agreed with his child that if the child pays the mortgage then he or she would acquire a beneficial interest in the property. As long as any child has made direct or indirect contribution to the purchase price of the property and acted to his or her detriment, then there appears to be no reason why that child could not argue that he or she has an interest in the property arising from a resulting trust. Conversely, the Trustee may be able to argue that these payments were effectively contribution to the child’s living expenses, which would not give rise to a proprietary interest in the property.
MATRIMONIAL PROCEEDINGS
Occasionally the Bankrupt and Non-Bankrupt Party are involved in matrimonial proceedings at the time the Bankruptcy Order is made. More often than not the Bankrupt’s financial problems are the cause or catalyst for these matrimonial proceedings. In such a situation, it is important that the Trustee obtains as much information as possible at the first available opportunity as to the state of play of the matrimonial proceedings and notify the matrimonial solicitors acting for the Bankrupt and Non-Bankrupt Party of his appointment immediately. The Trustee will need to ascertain whether the matrimonial financial relief proceedings have been commenced, and if so, whether an Order has been made for a property adjustment, lump sum, costs and/or maintenance.
If the Trustee discovers that the financial relief proceedings are ongoing but a final Order has not been made, the Trustee could apply for a stay of these proceedings pursuant to Section 285 of the Act. The Family Court may require the Trustee to be made a party to the proceedings and will require any application in relation to the family home issued by the Trustee be heard at the same time as the application for financial relief.
If the financial proceedings are ongoing, the Trustee should ask for copies of the Bankrupt’s and Non-Bankrupt’s form E, which set out in detail their financial position and for copies of any responses to questionnaires. Such documentation may prove very useful as they often reveal assets and/or income that the Bankrupt has failed to previously disclose to the Trustee, which may form part of the Bankruptcy estate.
Once a final Order has been made within the matrimonial proceedings prior to the onset of the bankruptcy proceedings then that Order cannot be challenged by a Trustee in Bankruptcy even if the Order states that the matrimonial home is to be transferred from the Bankrupt to the Non-Bankrupt (see the case Hill v Haines [2007] BRIR 1280).
Final Steps
The Trustee will need to apply for sanction from the Insolvency Service prior to commencing any legal proceedings. If no agreement is reached between the Trustee and the Bankrupt then the Trustee will have no alternative but to apply for an order for possession and sale of the family home or for an order under Section 313 of the Act, prior to the expiry of the three year time limit.
The specified steps that the Trustee must take are as follows:-
1. realise the Bankrupt’s former interest in the family home; or
2. apply for an Order for possession and/or sale of the family home; or
3. apply for an Order under Section 313 of the Act for a charge on the family home for the benefit of the Bankrupt’s estate; or
4. reach an agreement with the Bankrupt that the Bankrupt shall incur a specified liability to his estate in consideration that the family home shall cease to form part of the estate.
If the Trustee fails to take any of the above steps within the stipulated time period, then the Bankrupt’s former interest will automatically re-vest in the Bankrupt on the expiry of that time limit. Section 283A(6) of the Act does allow a Trustee to apply to Court to extend the three year period in such circumstances as the Court thinks appropriate. Consequently, it is essential that the Trustee does not delay in obtaining the necessary information to ascertain whether he or she has an interest in the Bankrupt’s family home.
ASCERTAINING WHETHER THE TRUSTEE HAS A BENEFICIAL INTEREST IN THE BANKRUPT’S FAMILY HOME
(i) Property held in the sole name of the Bankrupt
If the legal title to the family home is held in the sole name of the Bankrupt, then there is the presumption that the entire beneficial interest in the property was owned solely by the Bankrupt. Upon the Trustee’s appointment, the Bankrupt’s legal and beneficial interest in the property vests in the Trustee. However, the above presumption is rebuttable and not withstanding the fact that the property was purchased in the full name of the Bankrupt, it may in reality be held on trust for other beneficial owners. Often in the case of the family home, the Bankrupt’s spouse or partner (“Non-Bankrupt Party”) will have beneficial interest in the family home on the basis of his or her contributions to the purchase of the home. The nature and extent of the Bankrupt’s beneficial interest in the property will depend upon whether the Bankrupt and Non-Bankrupt Party had a common intention before or at the time the property was purchased to share the beneficial interest in the home. This common intention or agreement may be expressed in writing, such as a declaration of trust, orally or in some circumstances will exist by implication. Provided that the Non-Bankrupt Party claiming an interest in the property is able to show that he or she acted to their detriment in reliance on this agreement, then a beneficial interest under a constructive trust arises. However, even if a common intention is not established, provided that the Non-Bankrupt Party claiming an interest in the family home is able to prove a contribution to the purchase price, a resulting trust may be imposed. (see Lloyds Bank Plc –v- Rosset [1991] 1 AC 107).
(ii) Express Constructive Trust
When faced with a Non-Bankrupt Party seeking to assert his or her interest against the family home, the Trustee firstly needs to establish whether there is an expressed declaration of trust confirming that the beneficial ownership of the property is to be shared. The declaration of trust may be set out in the transfer, such as the Land Registry transfer form “TR1”, which is filed at the Land Registry or a formal declaration of trust may have been drawn up at the time the family home was purchased. A written declaration of trust is generally considered to provide conclusive evidence of the parties intention. More often than not, the co-owning parties claim that the common intention to share the beneficial interest was expressed orally but they must show that the Non-Bankrupt Party acted to his/her detriment relying upon this oral agreement.
(iii) Implied Constructive Trust
If there was no express agreement, the Courts may infer that the Non-Bankrupt Party was intended to have a beneficial interest deriving from the conduct of the Non-Bankrupt Party, such as a direct or indirect contribution to the purchase price of the property or payments towards the mortgage, provided always that this express or implied intention was coupled with the Non-Bankrupt Party acting to his/her detriment in reliance on the common intention. Examples of both direct and indirect contributions and detrimental reliance which have been held by the Court gives rise to a beneficial interest include:
1. payments towards the deposit on a property;
2. mortgage repayments;
3. expenditure incurred in improving the property which is not limited to mere maintenance;
4. substantial contributions to the parties household expenses, allowing the legal owner of the property to make the mortgage payments (see Grant –v- Edwards [1986] 1 Ch 638);
5. payments made into a joint account used to fund the mortgage and household expenses;
Even undertaking physical labour on substantial renovation works may be treated as giving rise to an interest (see Eves –v- Eves [1975] 1 WLR 1338).
(iv) Resulting Trust
Even if there were no express or implied agreements as to the sharing of the beneficial ownership of the property, the Non-Bankrupt Party may be able to establish that he/she has a beneficial interest in the family home held under a resulting trust in the absence of any evidence to the contrary. For a resulting trust to be imposed, there must have been a direct contribution to the purchase price of the property by the Non-Bankrupt Party, such as a payment towards the deposit, or the legal or conveyancing expenses incurred in purchasing the property or a contribution towards the mortgage repayments. In some cases, it may be possible to argue that a resulting trust does not arise, if there is evidence indicating that the direct contribution to the purchase price was in reality a gift or a loan. This is referred to as a “Presumption of Advancement” (see Gissing –v- Gissing [1971] AC 886) but this presumption does not apply as between unmarried parties or to transfers by a wife to her husband.
(v) Property in sole name of Non-Bankrupt Party
The above principles apply even if the family home is registered in the sole name of the Non-Bankrupt Party. The Trustee may be able to establish that the Bankrupt had a beneficial interest in the family home based on direct or indirect contribution to the purchase price of the property by the Bankrupt. The Trustee will also need to consider whether the Bankrupt has transferred any interest that he may have had in the property to the Non-Bankrupt Party or a third party at an undervalue, contravening Section 339 and/or 423 of the Insolvency Act 1986. Often it is the case that the Trustee has an uphill struggle in establishing a resulting or constructive trust in such cases since the parties are unlikely to assist him or her in establishing a common intention to share the beneficial ownership.
(vi) Property held in joint names
Nowadays it is more common for properties to be jointly owned by spouses or co-habiting parties. Where the legal title to a property is held in joint names, then in the absence of evidence to the contrary, there is a presumption that the beneficial interest in the property is shared equally between the parties.
EQUITABLE ACCOUNTING
Once the Trustee has ascertained the extent of the Bankrupt’s former interest in the family home, he may then need to take an equitable account between the beneficial owners. Equitable accounting principles allow the Court to take an account of expenditure incurred on the property to establish whether one co-owner has contributed more than his/her fair share towards the value of the property. This account does not alter the extent of the beneficial shares but determines the amount for which a co-owner should give credit to another co-owner in respect of expenditure incurred on the property. As confirmed in the case of Re Pavlou [1993] WLR 1046, the guiding principle is that a co-owner cannot take the benefit of an increase in the value of a property without making an allowance for what has been spent on the property by the other co-owner to obtain this increase.
(i) Mortgage Capital Repayments
In the case of Re Pavlou, the family home was in the joint names of the husband and wife. The marriage broke down and the husband left the home. The wife met all the mortgage payments thereafter and the husband was subsequently adjudicated Bankrupt. The wife sought credit for the mortgage capital and interest repayments. The Court held that the wife was entitled to credit for one half of the capital repayments made by the wife since she became solely responsible for the mortgage payments and not merely from the date of the Bankruptcy Order.
(ii) Mortgage Interest Repayments
With regard to mortgage interest payments, in the cases of Re Gorman [1991] ALL ER 717 and Re Pavlou, the Court directed that a separate account should (if required) be taken of mortgage interest payments by the Non-Bankrupt Party and the occupation rent owed by the Non-Bankrupt Party to the Trustee in consideration of the Non-Bankrupt Party’s sole occupation of the property or use of the Bankrupt’s/Trustee’s share of the home. In both cases it was conceded that the mortgage interest payments could be set off against an occupation rent for the period following the Bankruptcy Order. In both cases, the husband had left the home. The decisions were upheld in the case of Byford –v- Butler [2003] EWHC 1267(Ch) where the Court confirmed that where a Non-Bankrupt co-owner seeks to recover mortgage interest repayments, even where the Bankrupt has not been excluded and is still living at the property, the Trustee is entitled to set off for occupational rent against those mortgage interest payments.
(iii) Improvements
In the case of Re Pavlou, it was held that the Non-Bankrupt spouse was entitled to receive credit in respect of the costs of the improvements to the property that actually enhanced the value of the property. She was either entitled to be credited for one half of the costs of the improvement works paid by her before and after the Bankruptcy Order, that increased the value of the property or for half the increase in the value of the property which arose as a direct result of such works, which ever was the lesser.
(iv) Operation of equitable accounting
In the case of Clarke –v- Harlowe [2005] EWCH 3062 (ch) it held that equitable accounting commences at the date of separation of the co-owners. By way of background, Ms Clarke and Mr Harlowe purchased a property that was declared on the transfer to be held on trust as joint tenants. Mr Harlowe being the higher wage earner paid all the mortgage instalments and refurbishment costs to the property. Following the breakdown of the relationship the property was sold and Mr Harlowe relying on principles of equitable accounting sought a greater than 50% share of the net proceeds of sale in respect of the improvement costs paid by him.
In this particular case the arrangement between the parties was that the mortgage payments and the improvement costs were to be met by Mr Harlowe and there was no suggestion that Ms Clarke was under any obligation to reimburse Mr Harlowe for any part of these payments. The payments were in accordance with the arrangements between the parties and common purpose of the implied trust. Consequently, there was no breach or failure to comply with those arrangements on Ms Clarke’s part and equitable accounting did not operate such as to require Ms Clarke to contribute to the improvement costs from her share of the sale proceeds.
It appears from the case of Clarke –v- Harlowe that where a Bankrupt and Non-Bankrupt Party separate, resulting in one of the parties failing to discharge his or her agreed share of the property related liabilities, as a general rule equitable accounting would operate from the date of separation. However, this is not a hard and fast rule and each case would depend on the facts.
(v) Practical Steps
To avoid delay, if it is suggested that the Non-Bankrupt Party has made contributions to the mortgage, mortgage statements should be obtained from the mortgage company setting out all the capital and interest repayments from the date of the Bankruptcy Order or since the Non-Bankrupt spouse became solely responsible for the mortgage. If the mortgage is in the name of the Non-Bankrupt Party, a letter of authority should be requested from the Non-Bankrupt Party allowing the Trustee to be provided with the mortgage statements. The Trustee should also watch out for other mortgages and further advances on the family home.
When instructing a valuer in relation to improvements, the Trustee should also ask the valuer to provide an opinion as to whether the alleged renovation works improve the value of the property and, if so, by how much. The Trustee will also need to seek documentary evidence of the payments made towards the mortgage and/or renovations. It would also be sensible to check the Bankrupt’s bank account statements and PAYE slips/tax returns even if the Non-Bankrupt Party was paying all or the bulk of the mortgage, it is possible that some or all the Bankrupt’s funds were paid into the Non-Bankrupt Party’s sole account or the Bankrupt made payments to the household expenses enabling the Non-Bankrupt Party to meet the mortgage repayments.
EQUITY OF EXONERATION
In Re Pittortou (a Bankrupt) [1985] ALL ER 285, Mr Justice Scott discussed this principle by relying on the definition in Halsbury’s Laws of England, Volume 22 (4th Edition) paragraph 1071 that:-
“If the property of a married woman is mortgaged or charged in order to raise money for payment of her husband’s debts, or otherwise for his benefit, it is presumed, in the absence of evidence showing intention to the contrary, that she meant to charge her property merely by way of security, and in such case she is in the position of surety and is entitled to be indemnified by the husband, and to throw the debt primarily on his estate to the exoneration of her own.”
If the presumption is proved, then the charge will only be discharged from the Bankrupt’s share of the equity in the property. The presumption is most likely to arise in cases where the Bankrupt raises a first or second charge against the family home in order to settle his or her business debts. In Re Pittortou it was held that the equity of exoneration should apply to payments made purely for business purposes and for the Bankrupt’s sole benefit. In that case, the Bankrupt husband and Non-Bankrupt wife executed a legal charge over the property to secure the husband’s bank account which was used both in regard to his business and for payment of expenses relating to the matrimonial home. The Judge held that the payments for the joint benefit of the household should be discharged out of the net proceeds of sale from the house before division, but the equity of exoneration should apply to payments made purely for business purposes and for the husband’s sole benefit.
However, the presumption is rebuttable, particularly if it can be shown that the Bankrupt’s business borrowings were used to finance a business from which he derived an income for the benefit of his family as a whole and there is evidence that the parties did not intend that the security should fall wholly on one party’s beneficial interest to the exoneration of the other party. Nowadays it would be harder to establish the equity of exoneration where a further charge is taken out to support the Bankrupt’s business as generally the business would be for the benefit of the Bankrupt’s family and particularly where the Non-Bankrupt spouse has obtained independent legal advice before agreeing to this further charge.
THIRD PARTIES
It is often the case that third parties, i.e. the Bankrupt’s adult son or daughter claim an interest in the property for contributions that they have made to the mortgage or improvements. It is arguable that they may have acquired an interest in the property on constructive/resulting trust principles. For example, the Bankrupt may have agreed with his child that if the child pays the mortgage then he or she would acquire a beneficial interest in the property. As long as any child has made direct or indirect contribution to the purchase price of the property and acted to his or her detriment, then there appears to be no reason why that child could not argue that he or she has an interest in the property arising from a resulting trust. Conversely, the Trustee may be able to argue that these payments were effectively contribution to the child’s living expenses, which would not give rise to a proprietary interest in the property.
MATRIMONIAL PROCEEDINGS
Occasionally the Bankrupt and Non-Bankrupt Party are involved in matrimonial proceedings at the time the Bankruptcy Order is made. More often than not the Bankrupt’s financial problems are the cause or catalyst for these matrimonial proceedings. In such a situation, it is important that the Trustee obtains as much information as possible at the first available opportunity as to the state of play of the matrimonial proceedings and notify the matrimonial solicitors acting for the Bankrupt and Non-Bankrupt Party of his appointment immediately. The Trustee will need to ascertain whether the matrimonial financial relief proceedings have been commenced, and if so, whether an Order has been made for a property adjustment, lump sum, costs and/or maintenance.
If the Trustee discovers that the financial relief proceedings are ongoing but a final Order has not been made, the Trustee could apply for a stay of these proceedings pursuant to Section 285 of the Act. The Family Court may require the Trustee to be made a party to the proceedings and will require any application in relation to the family home issued by the Trustee be heard at the same time as the application for financial relief.
If the financial proceedings are ongoing, the Trustee should ask for copies of the Bankrupt’s and Non-Bankrupt’s form E, which set out in detail their financial position and for copies of any responses to questionnaires. Such documentation may prove very useful as they often reveal assets and/or income that the Bankrupt has failed to previously disclose to the Trustee, which may form part of the Bankruptcy estate.
Once a final Order has been made within the matrimonial proceedings prior to the onset of the bankruptcy proceedings then that Order cannot be challenged by a Trustee in Bankruptcy even if the Order states that the matrimonial home is to be transferred from the Bankrupt to the Non-Bankrupt (see the case Hill v Haines [2007] BRIR 1280).
Final Steps
The Trustee will need to apply for sanction from the Insolvency Service prior to commencing any legal proceedings. If no agreement is reached between the Trustee and the Bankrupt then the Trustee will have no alternative but to apply for an order for possession and sale of the family home or for an order under Section 313 of the Act, prior to the expiry of the three year time limit.
Monday 23 January 2012
Moving North would’ve insured Quinn’s COMI against IBRC’s claim
Now that the dust has settled after the verdict from the High Court in Belfast on Tuesday annulling Sean Quinn’s bankruptcy, it is perhaps an opportune time to analyse the Judgment and see where this leaves cross border applications for bankruptcy.
The Judgment from Mr Justice Donal Deeny deals with whether Mr Quinn has established his centre of main interest (COMI) in Derrylin, as he claimed, and also the extent to which someone seeking to go bankrupt in the UK should make their whereabouts ascertainable to creditors. It does not mean that everyone seeking to go bankrupt in the UK needs to worry that they will find their bankruptcy being challenged; it just means that they have to ensure they don’t make the same mistakes as Mr Quinn.
The Irish Bank Resolution Corporation’s (IBRC) challenge revolved around their claim that there had been misrepresentation and non-disclosure on the Statement of Affairs, and that, due to ongoing legal challenges against Sean Quinn, it would save costs to keep all the proceedings together in the Republic.
Firstly the Judge had to decide where Mr Quinn’s COMI was. It was not in dispute that his residence was in the Republic of Ireland, in fact he stated on his petition that he was not resident in Northern Ireland, but that he conducted his business from there and, therefore, was entitled to his bankruptcy as he carried out his economic activities in the North, which he said were dealing with his complex litigation and tending to some forestry issues. The Judge noted that dealing with his litigation may be enough to establish a COMI in the North, if indeed he was actually doing that in Fermanagh.
Upon coming to his decision the Judge noted that there was no definition of what a COMI is. The courts instead have had to rely on the primary legislation. The Judge was guided that the “centre of main interest” should correspond with the place where the debtor conducts the administration of his interests on a regular basis and is, therefore, ascertainable by third parties.
The Judge, on weighing the evidence, decided that Mr Quinn had not carried out these activities in the North and hence, on that basis, his centre of main interest was in the Republic.
Given that decision, it was not strictly necessary for the Judge to consider whether Mr Quinn’s whereabouts was ascertainable, but nevertheless he chose to do so. The Judge commented that ascertainablility did not mean that a bankrupt had to tell his creditors where he was living or working. Neither did he have to advertise it, but he should not hide it either, and it should be reasonably ascertainable by a creditor. The Judge further concluded that any office Mr Quinn may have had in the North was simply not ascertainable by his creditors.
So what can we learn about future applications for bankruptcy by Irish citizens in the UK?
We know for sure that it is possible for anyone in any EU state to open proceedings for bankruptcy in another EU country, if they have established their centre of main interests in that country and their whereabouts is reasonably ascertainable.
We know that if you are to establish your centre of main interests it can be done by being resident in a jurisdiction. That would entail living and working and carrying out your affairs in that jurisdiction. Part of the problem Mr Quinn faced was that he continued to maintain a home and family life in the Republic. This limited his scope for using the full extent of the EU legislation in his favour. If he had uprooted himself for as little as four months and based himself and his affairs North of the border, living and working in the North, it is my contention that he could have rightly claimed that his habitual residence was in the North.
We know that it will be a requirement to make your whereabouts ascertainable by those to whom you owe money. The Judge pointed out that, as a matter of public policy, the purpose of any proper legal system of commercial law is to ensure, as far as possible that debts lawfully owed should be paid. Those seeking to obtain monies owed to them must therefore be able to find those owing the money.
With this in mind how is someone contemplating bankruptcy in the UK to proceed? At Irish Bankruptcy UK our advice has always been that to ensure that EU regulations are complied with, all those seeking bankruptcy in the UK must become resident there for the majority of the six months before declaring bankruptcy. It is a big decision to take to move to a new country, however, it is fundamental in order to participate in the UK’s bankruptcy process, where bankrupts are automatically discharged from bankruptcy after only 12 months, as opposed to 12 years in the Republic. After which time they can return home to Ireland debt free and with their future earnings protected from existing creditors.
It seems it will now be the case that creditors will need to be able to easily ascertain the address of any debtor. Does this in fact mean that we have reached the position that they need to be advised of a change of address? The Judge specifically stated that the address need not be advertised, but if not, how will a creditor know you have moved? This also raises the vexed question of the reaction of lenders to knowledge that a debtor is no longer in the Republic. Will they take steps themselves to pursue bankruptcy as IBRC is in the current case, or will they take a more measured approach?
Many of those with very large liabilities will understandably be concerned that if they advise their creditors that they are moving to the UK for new opportunities, the creditors may instigate bankruptcy proceedings in Dublin as a way to take further control of the debtor. There is no guidance from the Judge on what precisely would constitute making your address readily ascertainable. He mentioned that Mr Quinn’s office was not in the phone book, in trade directories or on the web. From that can we infer that for someone starting a business in the UK, by listing their businesses contact details and posting them on their website that could be enough to make his presence ascertainable.
But, what would be the situation for someone who took up a paid position? The same opportunities would not apply. Perhaps the only solution, which protects the debtor and also alerts the creditor, would be to notify a change of address a short time prior to bankruptcy proceedings being filed.
Whilst the majority of the judgment is welcome, as it helps to clarify the legal definition of a centre of main interests, it does raise some significant questions that need answering. In light of this, potential Irish bankrupts to the UK need to tread carefully and do everything by the book.
Steve Thatcher is a legal adviser with Irish Bankruptcy UK (http://www.irishbankruptcyuk.com)
The Judgment from Mr Justice Donal Deeny deals with whether Mr Quinn has established his centre of main interest (COMI) in Derrylin, as he claimed, and also the extent to which someone seeking to go bankrupt in the UK should make their whereabouts ascertainable to creditors. It does not mean that everyone seeking to go bankrupt in the UK needs to worry that they will find their bankruptcy being challenged; it just means that they have to ensure they don’t make the same mistakes as Mr Quinn.
The Irish Bank Resolution Corporation’s (IBRC) challenge revolved around their claim that there had been misrepresentation and non-disclosure on the Statement of Affairs, and that, due to ongoing legal challenges against Sean Quinn, it would save costs to keep all the proceedings together in the Republic.
Firstly the Judge had to decide where Mr Quinn’s COMI was. It was not in dispute that his residence was in the Republic of Ireland, in fact he stated on his petition that he was not resident in Northern Ireland, but that he conducted his business from there and, therefore, was entitled to his bankruptcy as he carried out his economic activities in the North, which he said were dealing with his complex litigation and tending to some forestry issues. The Judge noted that dealing with his litigation may be enough to establish a COMI in the North, if indeed he was actually doing that in Fermanagh.
Upon coming to his decision the Judge noted that there was no definition of what a COMI is. The courts instead have had to rely on the primary legislation. The Judge was guided that the “centre of main interest” should correspond with the place where the debtor conducts the administration of his interests on a regular basis and is, therefore, ascertainable by third parties.
The Judge, on weighing the evidence, decided that Mr Quinn had not carried out these activities in the North and hence, on that basis, his centre of main interest was in the Republic.
Given that decision, it was not strictly necessary for the Judge to consider whether Mr Quinn’s whereabouts was ascertainable, but nevertheless he chose to do so. The Judge commented that ascertainablility did not mean that a bankrupt had to tell his creditors where he was living or working. Neither did he have to advertise it, but he should not hide it either, and it should be reasonably ascertainable by a creditor. The Judge further concluded that any office Mr Quinn may have had in the North was simply not ascertainable by his creditors.
So what can we learn about future applications for bankruptcy by Irish citizens in the UK?
We know for sure that it is possible for anyone in any EU state to open proceedings for bankruptcy in another EU country, if they have established their centre of main interests in that country and their whereabouts is reasonably ascertainable.
We know that if you are to establish your centre of main interests it can be done by being resident in a jurisdiction. That would entail living and working and carrying out your affairs in that jurisdiction. Part of the problem Mr Quinn faced was that he continued to maintain a home and family life in the Republic. This limited his scope for using the full extent of the EU legislation in his favour. If he had uprooted himself for as little as four months and based himself and his affairs North of the border, living and working in the North, it is my contention that he could have rightly claimed that his habitual residence was in the North.
We know that it will be a requirement to make your whereabouts ascertainable by those to whom you owe money. The Judge pointed out that, as a matter of public policy, the purpose of any proper legal system of commercial law is to ensure, as far as possible that debts lawfully owed should be paid. Those seeking to obtain monies owed to them must therefore be able to find those owing the money.
With this in mind how is someone contemplating bankruptcy in the UK to proceed? At Irish Bankruptcy UK our advice has always been that to ensure that EU regulations are complied with, all those seeking bankruptcy in the UK must become resident there for the majority of the six months before declaring bankruptcy. It is a big decision to take to move to a new country, however, it is fundamental in order to participate in the UK’s bankruptcy process, where bankrupts are automatically discharged from bankruptcy after only 12 months, as opposed to 12 years in the Republic. After which time they can return home to Ireland debt free and with their future earnings protected from existing creditors.
It seems it will now be the case that creditors will need to be able to easily ascertain the address of any debtor. Does this in fact mean that we have reached the position that they need to be advised of a change of address? The Judge specifically stated that the address need not be advertised, but if not, how will a creditor know you have moved? This also raises the vexed question of the reaction of lenders to knowledge that a debtor is no longer in the Republic. Will they take steps themselves to pursue bankruptcy as IBRC is in the current case, or will they take a more measured approach?
Many of those with very large liabilities will understandably be concerned that if they advise their creditors that they are moving to the UK for new opportunities, the creditors may instigate bankruptcy proceedings in Dublin as a way to take further control of the debtor. There is no guidance from the Judge on what precisely would constitute making your address readily ascertainable. He mentioned that Mr Quinn’s office was not in the phone book, in trade directories or on the web. From that can we infer that for someone starting a business in the UK, by listing their businesses contact details and posting them on their website that could be enough to make his presence ascertainable.
But, what would be the situation for someone who took up a paid position? The same opportunities would not apply. Perhaps the only solution, which protects the debtor and also alerts the creditor, would be to notify a change of address a short time prior to bankruptcy proceedings being filed.
Whilst the majority of the judgment is welcome, as it helps to clarify the legal definition of a centre of main interests, it does raise some significant questions that need answering. In light of this, potential Irish bankrupts to the UK need to tread carefully and do everything by the book.
Steve Thatcher is a legal adviser with Irish Bankruptcy UK (http://www.irishbankruptcyuk.com)
A Personal View on the Irish Investment property problem
I have just returned from a trip to Dublin to meet with my partners irishbankruptcyuk.ie . It was a sobering experience as they introduced me to clients they had signed up for the bankruptcy process, solicitors who were trying to deal with ever increasing hard handed approaches from lenders and just ordinary people who are trying desperately to work out what they should do.
I had a round of meetings with people who were in differing degrees of financial meltdown, from a couple who had negative equity in excess of €500,000 on their matrimonial home and an investment. With the husband on short time and the wife not working, making mortgage payments is proving impossible. They do not want to carry the burden of this debt around with them for the rest of their lives. Their decision is to take their family and move to Northern Ireland and try to start again. In a few months time once they are settled they will look to go bankrupt and close a chapter on their property venture.
I met another client who had done very well in the property construction sector. He had made his money but like many others was encouraged by his bankers to take on more and more debt to buy more land to develop. When the credit crunch hit after the collapse of Lehman Brothers, he fund he couldn’t sell the properties he had constructed. He couldn’t make repayments on his loans and he defaulted. He has sat down with his bank, but they have simply said that he has to make payments. He owes many millions. How is he supposed to do that? There is no magic pot of money he can go to. He is leaving Ireland and coming to live in England. He is getting out of construction and seeking a new job. In due course he will take measures to go bankrupt. He doesn’t like to do it but how else is he going to get rid of millions of Euro of debt.
I met a solicitor who now advises her clients on how they can go bankrupt in the UK, whilst at the same time trying to do deals with banks to write of debt that will never be repaid. She says that there may be loopholes in some agreements, if this is accepted by the banks in individual cases there may be a chance to get the loans wiped. If not, her clients will have been living in the UK long enough to go bankrupt if they so wish.
With bankruptcy in Ireland not being a realistic option, many are looking to move to Northern Ireland and mainland England, establish their lives here and then avail themselves of the friendlier UK bankruptcy regime. With over 1000 people a week in the UK going bankrupt and that many again also doing an IVA or a debt relief order, compared to just 29 people in a whole of a year going bankrupt in Ireland, you can see where the solution lies.
I had a round of meetings with people who were in differing degrees of financial meltdown, from a couple who had negative equity in excess of €500,000 on their matrimonial home and an investment. With the husband on short time and the wife not working, making mortgage payments is proving impossible. They do not want to carry the burden of this debt around with them for the rest of their lives. Their decision is to take their family and move to Northern Ireland and try to start again. In a few months time once they are settled they will look to go bankrupt and close a chapter on their property venture.
I met another client who had done very well in the property construction sector. He had made his money but like many others was encouraged by his bankers to take on more and more debt to buy more land to develop. When the credit crunch hit after the collapse of Lehman Brothers, he fund he couldn’t sell the properties he had constructed. He couldn’t make repayments on his loans and he defaulted. He has sat down with his bank, but they have simply said that he has to make payments. He owes many millions. How is he supposed to do that? There is no magic pot of money he can go to. He is leaving Ireland and coming to live in England. He is getting out of construction and seeking a new job. In due course he will take measures to go bankrupt. He doesn’t like to do it but how else is he going to get rid of millions of Euro of debt.
I met a solicitor who now advises her clients on how they can go bankrupt in the UK, whilst at the same time trying to do deals with banks to write of debt that will never be repaid. She says that there may be loopholes in some agreements, if this is accepted by the banks in individual cases there may be a chance to get the loans wiped. If not, her clients will have been living in the UK long enough to go bankrupt if they so wish.
With bankruptcy in Ireland not being a realistic option, many are looking to move to Northern Ireland and mainland England, establish their lives here and then avail themselves of the friendlier UK bankruptcy regime. With over 1000 people a week in the UK going bankrupt and that many again also doing an IVA or a debt relief order, compared to just 29 people in a whole of a year going bankrupt in Ireland, you can see where the solution lies.
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