Personal Debt Problems with Help from the EU

The majority of consumers among member states of the European Union (EU) are not aware of a number of unexpected compensations that EU membership provides concerning personal insolvency. Those compensations are rooted in the basic principle of the free migration of labour which European Union people enjoy throughout the EU and are specially germane for people who are overburdened by personal debt worries and are already threatened with intensive bankruptcy actions in some member states of the EU.
There are actually significant variations in insolvency legislation between individual member countries of the EU. The United Kingdom is frequently praised as being a glowing beacon of enlightenment insofar as it has created a wide-ranging body of personal bankruptcy legislation. This provides any financially troubled person with a range of approaches to their predicament. The wide variety of solutions and alternatives on offer are neither draconian nor punitive. What they provide is acknowledgement of every citizen’s right to a second chance – a new start in fact. The underlying vision could be described as pro-entrepreneurial quite like the entrepreneurial business environment in the USA. When compared to several other member countries of the European Union, British system is very appealing. In Great Britain insolvent debtors are able to experience the chance to rehabilitate themselves, whilst in some other EU member nations the present legal and national culture tends to aim to punish the insolvent person. So how may the insolvency system in the United Kingdom offer unexpected benefits for European Union citizens who are not UK citizens?

European Union laws permit the insolvency laws of one European Union member country to apply in another, subject to certain provisos. One of the attributes of cross-border insolvency is that consumers can look to start up insolvency proceedings in a country of the EU, other than the state in which they dwell and work. Moreover, they can pick out any member state in which to exercise this legal right and it is only to be expected that they would decide on a nation that has put into law insolvency laws more beneficial to their individual needs than that which prevails in their own ‘home’ jurisdiction. This exercise of these rights is sometimes labelled as “forum shopping”. As a result of this privilege, an insolvent borrower who lives in any member country might be able to submit an Individual Voluntary Arrangement (IVA) or petition for bankruptcy or indeed go after some other sort of legal cure for their debt troubles in the UK – as long as the UK is their “centre of main interests”. The definition of the term “centre of main interests” or COMI is of course key to the matter. The applicable EU Regulation affirms that “the centre of main interests should correspond to the place where the debtor conducts the administration of his interests regularly and is consequently ascertainable by third parties”.

The common interpretation of this statement is that the COMI would be the country where the consumer mostly performs their business, occupation or self-employment. Where the person in debt doesn’t trade or maintain an occupation, the COMI will likely be regarded as the state where he or she lives. If the person in debt lives in one state and trades in another, the COMI is the country in which the borrower trades. Where the person’s only connection with a state is that they work in that location on a non self-employed basis (perhaps travelling from a nearby country), then the COMI will normally be in the state in which they are living and for that reason pay bills, operate a bank account, buy goods and so forth.

In the instance of bankruptcy proceedings, the COMI is set at the date the petition is presented and not where, in the past, the pertinent activity was conducted. Therefore the place of business of lenders as well as the country in which outstanding debts were sustained are not relevant factors in ascertaining a COMI. Apparently, although not relevant to personal insolvency is that in the matter of a company, the COMI is the registered office, without confirmation to the contrary.

What about an IVA? To take one example: a serving person in the Armed Forces who may be working in another country and who may perhaps be stationed abroad for long periods may enter into an IVA in Great Britain. The very same could affect anyone who is for example being employed in an EU member state but whose assets are located in the UK. In the same way, anyone who is employed in the merchant navy may enter into an IVA, even though they may perhaps be abroad for much of their working lives, as long as their “centre of main interests” is in the UK. Naturally there are various scenarios which could have an effect on the debtor’s capacity to stick to the conditions of an IVA. These might possibly include property and assets owned or purchased in another country or the likelihood of incurring debts abroad during or just before the term of the proposed IVA. Yet, lenders will usually consent to such an IVA provided they are content with the debtor’s capacity to stick to the terms. It should be noted that an IVA in the UK is restricted to England, Wales and Northern Ireland. For Scotland the generally comparable insolvency option is a Trust Deed.

About Paddy Byrne

I work at National Debt Relief; a well established debt help company. I have had various roles throughout the company which has allowed me to enhance and develop my knowledge on Debt Solutions, legislation and other areas of the Financial Industry in both the UK and Ireland. I currently write for the National Debt Relief website, as well as other websites. I have written 100's of articles relating to different topics on debt.
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