Overseas Bankruptcy and Cross Border Insolvency Laws

Overseas bankruptcy and cross border insolvency cases can be very complex. Various factors can influence bankruptcy and how the bankruptcy will be dealt with. The main criteria that can affect this is the country that the person now resides in, and the amount and value of any assets within the UK or your new country of residence.

When you declare yourself bankrupt while living overseas the bankruptcy is, in most cases, contained within the United Kingdom. The effects of the bankruptcy are usually confined to the UK and the bankruptcy will show on your credit record within the UK for six years from the start date of the bankruptcy.

The bankruptcy will seldom impact upon your new life overseas unless you have assets in your new country of residence. If, for example, you owned a property outright in your overseas country this will be considered an asset in your UK bankruptcy. If the Insolvency Service is aware of this property then the bankruptcy proceedings can be transferred overseas and "secondary proceedings" are opened in your country of residence.

If secondary proceedings are opened in your new country of residence then any creditors that you have in the overseas country would be dealt with over and above the creditors that you have in the UK. Any funds left over from the asset after the overseas creditors have been paid would be returned to the Insolvency Service in the UK and split between the UK creditors.

NOTE; if the property that you declare as part of your bankruptcy has no equity, then the property is not seen as an asset and secondary proceedings would not be opened as there would be no asset to recover and deal with.

There are various countries around the world that now have an agreement to help each other when it comes to Cross Border Insolvency cases. The model law surrounding this reciprocal agreement is known as UNCITRAL law.

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UNCITRAL Law and Cross Border Insolvency

What is UNCITRAL Law?

In basic terms UNCITRAL law is the model law adopted by many countries worldwide to help deal with Cross Border Insolvency cases.

This law was developed by the United Nations Commission on International Trade Law in the 1990's and adopted on the 30^th of May 1997. The United Nations encouraged the use of this law as a standard that can be used in Insolvency and Bankruptcy cases where assets are located in different countries.

Since then various countries worldwide have adopted this law. It was eventually implemented in Great Britain on the 4^th of April 2006.

One of the ideas was to standardise the way that individual countries work, and in cases where co-operation is required the idea is that the countries will recognise each other and provide assistance where required. One of the slight problems that occurred is that individual countries are entitled to modify the Model Law to suit their own Insolvency Laws and circumstances.

The UNCITRAL law means that foreign office holders and creditors will have access to the Court system in a country where the model law applies and is recognised. This is designed to reduce costs and the overall time that these complex cases can take to deal with.

Payment Orders-what are they and why are they applied?

When you are declared bankrupt the Insolvency Service will look at your overall position with regard to assets and income. Simply speaking if you have no assets they will then consider your income to decide if they feel you have any disposable income.

In bankruptcy you are allowed reasonable living expenses. You are not allowed luxury items such as tobacco, gym memberships, or high allowances in regard to clothing or social expenses. If your income exceeds your reasonable expenditure, the Insolvency Service will order you to pay some of your disposable income back to your creditors listed in your bankruptcy.

The calculation is normally based on 66% of your disposable income and payments will continue over a period of 36 months. If you have £300 disposable income after your reasonable expenditure then the Insolvency Service will apply what is known as an Income Payment Agreement (IPA). It is also worth bearing in mind that Income Payment Agreements can be varied up or down depending on your circumstances and income.

In general the Insolvency Service are fair when dealing with these issues and will not apply a payment order if this will leave you in financial hardship.