A Happy New Year to all and we start with a subject which is in itself depressing but in keeping with the “Eastenders” philosophy I hope that watching the misery of others will help the majority feel grateful acknowledging that for many, there but for the grace of God go we.
Just before Christmas we learned that one of NAMA’s top developers, John Fleming, had filed for bankruptcy in his current base of Essex in the UK. This was quite a milestone event and the concern must be that in 2011, more NAMA developers that have overseas interests may file for bankruptcy in those jurisdictions that are more favourable to their financial interests than here at home.
And during the past week we have learned that in 2010 a total of 1,250 people in Northern Ireland had filed for bankruptcy – it is not clear from the reporting if this total includes cases where bankruptcy was initiated by creditors. So that’s a minimum of 1,250 people in a jurisdiction whose latest population estimate is 1,789,000. In Ireland we have about 10 bankruptcies a year and that includes creditor-initiated bankruptcies like that of former Anglo chairman, Sean Fitzpatrick in July 2010. And with our population of 4,470,000 that means that our northern neighbour’s bankruptcy rate is 350 times that of ours. Indeed for the UK as a whole their bankruptcy rate is 375 times our’s. But that all pales into insignificance compared to the home of capitalism, the US, whose bankruptcy rate is 2000 times our’s.
Although there are plans to reform Ireland’s personal bankruptcy regime (indeed the recent Memorandum of Understanding with the IMF/EU commits the Irish government to presenting reform legislation to the Oireachtas by December 2012 – yes, two years from now), it seems that those presently facing financial ruin must submit to what is acknowledged as one of the most draconian bankruptcy regimes in the world – with loss of the usual assets plus potentially the family home, pension and bankruptcy lasting up to 12 years.
The larger-scale NAMA developers will have international assets which may give them the necessary foothold to file for bankruptcy overseas. As we are seeing in the case of former Anglo CEO, David Drumm’s bankruptcy in the US, he is entitled to keep his family home, his pension and indeed a few farm animals and a sewing machine under Massachusetts law. But bankruptcy isn’t just for the rich. With an estimated 200,000 households in negative equity in Ireland and that number likely to grow (in my view with a prediction that prices will drop 5% in the forthcoming year which will offset the usual repayment of mortgage principal) and with family finances already strained and having to endure new taxes, there is an urgent need for an efficient bankruptcy regime that will balance repayment of debt with personal financial recovery. Sadly that reform is unlikely to be forthcoming in the next year so it will be law firms in London and New York that benefit from self-declared bankruptcies elsewhere. And of course NAMA’s hardball tactics may just bolster those overseas bankruptcies.
UPDATE: 5th August, 2011. An extract of the bankruptcy documents of John Fleming has been published by thestory.ie and is available here. The documents reveal extensive debts, directorships and the grounds upon which John claimed the right to file for bankruptcy in the UK.
UPDATE: 9th August, 2011. The BBC reports that for the second quarter of 2011, there were a record 752 personal insolvencies in Northern Ireland – that includes those made bankrupt and who have entered into an Individual Voluntary Arrangement (IVA, a UK device whereby a person pays back a certain % of their debts over a period of time and has the remainder written off). The 752 comprises 451 bankruptcies and 301 IVAs. The 752 personal insolvencies in Q2, 2011 comes on the back of the record 692 in Q1, 2011 (451 bankruptcies, coincidentally identical to the figure for Q2, and 241 IVAs). The total bankruptcies for H1, 2011 now stands at 902 compared with a total of 1,321 in 2010 (73%). The bankruptcy rate in Northern Ireland is now 500x that of the Republic per 100,000 population (902*2/1,789,000 cf 10/4,581,000). Factor in IVAs and the figures look ever more stark.
NAMA Wine Lake 
So the current government in IE will do nothing at all and anyone with half a brain and the slightest exposure to credit outside IE will go to the most favourable venue
needless to say anyone in the pooh who has any form of US credit will go prepackaged to the nearest stripmall on their next visit to the US and wave the big middle finger to the IE banks. And be clear in less than two years
Which will yet again show that NAMA was ill designed and neglected to concern itself with the regular joe on the street (so to speak)
Shep
I think Nama was well rather than ill-designed. Remember, LTEV, no bailouts, pump credit into system, stabilise banks etc. Unfortunately (for the designers), it was conceived on quicksands, suffered the consequences of the Law of Unintended Consequences and like most battle/business plans did not survive first contact with the enemy.
Surely, it would be easy to push through legislation that would prevent bankruptcy tourism. I suspect that if this bankrupcy shopping becomes a pattern, many less wealthy indebted people will also become more inclined to treat their creditors with similar distain and wave the two fingers. If this happens on any large scale, then we as a country are in deep, deep trouble. If I owe the bank or Exchequer ten thousand euro, I’m in trouble but if ten thousand people refuse to repay such debts then the banks and Exchequer is in trouble at things could spiral out of control very easily.
Sorry, but NAMA is a special form of bankruptcy, especially for the developers and banks and merely complicates and delays resolution.
It should be noted that while anyone with assets or liabilities, generally speaking, can apply for protection from creditors, aka, bankruptcy, in any and every such country, they can still be subject to bankruptcy in respect of Irish assets and liabilities. One 16th of my law degree was devoted to Private International law, and a chunk of that dealt with the doctrine of renvoi, whereby one judge in one country decides what another judge in another country would do!!! Very lucrative! M’learned friends will be pleased! Expect no six month resolution of these bankruptcies!
Ireland sees no need to protect people from their creditors, says it all really? No wonder the taxpayer will foot all those bills from NAMA and the banks! The Patrons think that all of this country’s taxes is their slush fund and guess what? It is, until you say otherwise!
The Christmas Eve bankruptcy list in the Belfast Gazette included a taxi driver from one of the nicer streets in south Belfast and a job coach. Both were also listed as being former property developers. Although the job coach gave a NI address his business address was in Donegal and his firm was registered with the CRO rather than Companies House.
Another of the bankruptcies concerned a businessman with a Belfast business address but with a residential address at Howth Cottages in County Dublin.
By far the most high profile bankrupt developer from NI is Patrick Hegarty, though that took place in Edinburgh on foot of an application by BoI.
Ireland is a client/patron system. Influence, pull and “who you know” matter and the law is for foreigners and outsiders.
Bankruptcy rate is lower in Ireland because it is so hard to enter and even harder to leave.
Access to credit is part of the system. No one fails except when the system is dead. Yes. It is dead. All lending institutions are insolvent or short of capital as with the Credit Unions.
There will be a new system and as it is the one best known, the odds are very high that the old one will return in new guise. Serfs are not free if they have debts that they must pay. They leave instead, once they cannot pay, or else “give back the house”. Hence emigration made the old system work and enabled those who stayed to survive.
As we can see, the “inherently very stable” system in fact is very unstable, and dropping interest rates made a dangerous situation much worse, obvious to all now! At the time, it was regarded as a new era, remember?
As you make clear in your piece, it is a symptom of a very dangerous system that looks as if it could work but in fact the real system is completely different from that upon which most of our legislation is based, the UK.
The economists clearly misled everyone including their employers except for MK and to a lesser extent, KW. To find the truth, makes those at the centre of the money machine less likely to make so much money themselves. Therefore the truth is suppressed, as we saw that B, Bertie, doing.