Bankruptcy Tourism

Moving to a country with more lenient insolvency laws in order to clear one’s debts.

Writing for The Times of London, Helen Nugent reported on an increase in the number of foreigners seeking to declare themselves bankrupt in England:

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, with Kent being a popular destination because of its easy access to continental Europe.

According to Nugent, bankruptcy proceedings in countries such as Germany and Ireland can take up to 9 and 12 years respectively; in England, a person can free themselves from some debts 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.

Nugent explained how the European Union makes bankruptcy tourismpossible:

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.