Cross Border Insolvency and Bankruptcy Law
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 30th 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 4th 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.
Insolvency Advice for people living abroad
If you are thinking of declaring yourself bankrupt in England or Wales and you are living overseas then it pays to take specialist advice. In most cases the bankruptcy will not affect you when you are living in a different Country as long as the process is handled correctly.
Our company provides a free initial consultation to explain all of the options that are available to you. If you are a British Expatriate that is looking for Bankruptcy advice or an assisted bankruptcy service from overseas then either email us or complete our short enquiry form-we can help!
Payment Orders and Agreements in Bankruptcy-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 used to be based on 66% of your disposable income however, since December 2010 the Insolvency service has taken a much tougher approach with regards to disposable income in bankruptcy. If you have any disposable income (from £20 upwards) the Insolvency Service will apply what is known as an Income Payment Agreement (IPA).
In general the Insolvency Service is fair when dealing with these issues and will not apply a payment order if this will leave you in financial hardship. In overseas bankruptcy cases there can be different costs of living and this does also need to be taken into account.
For further and more detailed information, please see our Income Payment Agreements page which will explain how Payment Orders and Agreements are calculated and applied during the bankruptcy process.