Rise in numbers applying for bankruptcy in NI, says expert

FIGURES INDICATE that more people from the Republic are moving to Northern Ireland to take advantage of its easier bankruptcy regime, according to a leading insolvency lawyer.

Bernard Dunleavy – a barrister who has represented parties in a number of high-profile cases – told a conference yesterday organised by Kavanagh Fennell to discuss personal insolvency proposals that in 2010, 905 people applied to Northern courts for bankruptcy.

Last year, this increased to 1,456. Mr Dunleavy said the figures suggested that people are moving to take advantage of the more “debtor-friendly” regime.

As UK law applies in Northern Ireland, bankrupts are discharged after one year; the period is 12 years in the Republic.

Mr Dunleavy, who has worked on the McNamara, Quinn, Fleming and Zoe cases among others, said that the Republic’s laws mean that few apply to its courts for bankruptcy.

A Personal Insolvency Bill, which the Oireachtas is due to debate, promises to reduce this period to three years. But it can be extended to eight in cases of non-compliance, fraud or dishonest behaviour by the applicant.

Mr Dunleavy pointed out that as many of the cases are likely to come before the Circuit Court, there could be a problem with judges in that forum who have no experience on the bench of these matters.

Tom Kavanagh, one of the firm’s partners, suggested that if the banks were to have a veto the period could effectively end up being eight years in most cases.

Another partner, Glenn Bradley, who advises clients in distress on restructuring debts with their banks, told the conference that different lending institutions have different attitudes towards Irish business.

The key difference lies between foreign and domestic-owned banks, particularly those in which the State has controlling or substantial interests, such as AIB or Bank of Ireland.

Irish banks are generally more open to supporting businesses. However, overseas-controlled institutions, such as Ulster Bank, which is owned by Royal Bank of Scotland, have less patience with the Irish market.

He added that Bank of Scotland is exiting the market, while the National Assets Management Agency and Irish Bank Reconstruction Corporation – made up of what was Anglo Irish and Irish Nationwide – also have exit strategies.

That is likely to leave less upside for borrowers who are seeking to restructure their debts, according to Mr Bradley.

Kavanagh Fennell published figures this week showing that 301 companies collapsed during the first three months of the year, compared with 249 during the same period in 2011.

Partner Ken Fennell said that construction and its associated services were worst hit.