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From the UK: How Will The Brexit Affect Insolvency and Debts in The UK

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shutterstock_250467778With all the nerves being frayed, and market and currency droppings, and the vast amount of unknown in the air and country at the moment due to the UK voting to leave the EU, I thought I would add just a bit more to it.

I am joking of course:)

However, with all this unknown territory we have entered, one thing popped into my head, how is this exit from the EU going to affect insolvency laws, bankruptcy and DRO’s, IVA’s, and debts, here in the UK, abroad and in other countries???

I’m sorry to say at this time, no one really knows.

We can guess and speculate, based on past experiences and sound understanding of not just the UK’s insolvency laws, but also other countries rules and laws regarding debt and insolvency. But the fact is, until the issue is fully addressed by the insolvency service and the government, it will be just speculation.

Some factors that may play into what does change, stay the same, or be added as new, will be what rules and laws we decide to keep, drop, or modify that we currently have within the EU.

By leaving the EU, we are no longer bound by their directives and rules and laws.

An example is that a few years back the EU issued a directive stating insurance for men and woman could not be gender bias; premiums could not be based on sex, male or female.

For years car insurance for women was lower than for men, the directive caused car insurance for women to increase.

For the most part, UK’s insolvency laws and rights afforded someone going bankrupt, or entering into some other form of insolvency will not change. Our insolvency laws have been outlined and the most recent change in 1986, is still binding.

There may very will be some minor changes, and minor may be a subjective thing depending on each person’s individual set of circumstances.


shutterstock_143336302Bankruptcy

The exit from the EU will have very little affect on our actual bankruptcy procedures and how to go about becoming bankrupt. This process is set-out here in the UK, and my guess is will remain the same.

There will be some key issues to arise.

One is the protection afforded someone going bankrupt in the UK has with regards to debts in other countries, especially EU countries.

Currently you can include EU debts in a UK bankruptcy, and discharge those debts, which means you cannot be chased for those debts in the UK and the EU.

Once the UK finalises the leave from the EU, any debts someone may have in the EU, will fall into the category of similar non-EU debts in other countries such as the United States, Australia, and Dubai. While you can include those debts in a UK bankruptcy, however, you are only afforded the protection from them in the UK.

This means after the full exit from the EU, if someone has debts in Germany and includes them in a UK bankruptcy, they can be included and discharged, but only in the UK.

Should the person going bankrupt return to Germany, they would be able to be chased for the debt(s) there.

The protection of bankruptcy may no longer be available in the EU as we are no longer in the EU.

This also ties in with the EC Regulation on Insolvency Proceedings.

This regulation came into force in May 2002, and is set to be renewed or recast in 2017.

In essence what this regulation states is this:

“The Insolvency Regulation introduces conflicts of law rules for insolvency proceedings concerning debtors based in the EU with operations in more than one member state, giving particular prominence to insolvency proceedings commenced in the member state in which a debtor has its centre of main interests; insolvency proceedings elsewhere in the EU should be purely local in effect.”

This allows someone who may have debts in various countries within the EU to go bankrupt where they have the majority or “centre of main interests”. This previously had allowed someone to move to the UK from an EU country, go bankrupt in the UK and discharge their EU debts, as long as they could show they lived, worked, banked, paid taxes, etc, made the UK their centre of interests.

If someone going bankrupt in the UK has property or other assets in the EU, the Official Receiver or Trustee, may not have the authority once the exit is complete to dispose of those assets. They may either need to obtain that authority, or have the bankrupt assist in any sale of a property or other asset.

There may be some other minor areas that could change, but again, this is all speculation.


shutterstock_260912165IVA’s/Individual Voluntary Arrangements

The process of an IVA I would think will remain the same, just as I would think going bankrupt will remain the same. The issue will be the protection afforded the person(s) in the IVA, will only stay in the UK, whereas prior to the exit from the EU, the protection would have extended to the EU as well.

If someone were to include an EU debt in an IVA, there are provisions in place for IVA payments to be sent to creditors in other countries, such as Oz, or the US. It is the creditor’s responsibility to handle any currency exchange.

Currently an IVA is not binding to creditors in countries outside the UK and EU, and with the UK leaving the EU, an IVA may not be binding in the EU.

Again, it will depend on what is worked out for many future questions, and IVA’s and insolvency is just one of them.


Credit CardCollecting Debts

Debts that have been originated in the UK in all probability will see no changes in how they are collected. Lenders and collection agencies can send notices, phone calls, issue statutory demands, file for CCJ’s, and even make someone bankrupt.

These are core UK collection tools.

How a debt may be collected from outside the UK, such as if someone has a debt in France, or Spain and how it may get collected here in the UK, could possibly change.

If the original terms and conditions has what is known as a “non-exclusive jurisdiction” clause, the account could be given to an agent here in the UK to collect.

I am unsure how many, if any, debts originated in the EU would have such a clause.

Suppose you have UK debt and leave to live in the EU. Currently there is a “European Payment Order” which allows debts to be enforced and collected across boarders. As we are now a member of the EU, this is in force. As to if it will remain in force or change, at this time it has not been addressed.

The selling of debts to collection agencies in other countries I would think would remain unaffected.

A debt that originated in the EU, while prior to the exit could be collected in the UK, may now be sold to a UK collection agency to collect it here in the UK.

But again, as a UK resident you are afforded all the rights and rules and options we have here to deal with the debt.

This is just a few scenarios and issues that may arise from the UK leaving the EU from an insolvency and debt perspective. And again, it is speculation based on current facts and regulations we share with the EU.

More will be revealed in the upcoming months, and years.

,With all the nerves being frayed, and market and currency droppings, and the vast amount of unknown in the air and country at the moment due to the UK voting to leave the EU, I thought I would add jus

This article by Jon Emge was syndicated by the Personal Finance Syndication Network.




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