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Debt Relief – Insolvency – Bankruptcy Information » Bankruptcy Help » Standardizing Individual Bankruptcy Laws inside The european union

Standardizing Individual Bankruptcy Laws inside The european union

Did you know that now there are twenty seven nations in the European Union (EU) each and every one using their own individual bankruptcy legislation? The mind boggles at the numbers, array and complexities of rules which this situation must entail. The EU not surprisingly seeks to harmonize legislation and this includes insolvency laws in member states as one of its goals. Until such time as such harmonization is established, inhabitants of member nations of the EU may by law seek to deal with their own personal personal bankruptcy and attempt to apply a solution within a member nation that is most beneficial for position. In the area of personal bankruptcy, bankruptcy tourism has sprung up as citizens have become aware that they might look to manage their financial situations in a jurisdiction other than that in which their debt was sustained. Bankruptcy tourism could very well be humorously thought as the free movement of financial solutions (or problems), going hand in hand with the free movement of labour.


The United Kingdom notably stands out as being a jurisdiction where there is what can be described as an entrepreneurial approach to those people who experience financial issues. Bankruptcy and Individual Voluntary Arrangements (IVAs) essentially offer financially troubled debtors a second possibility and an opportunity to rehabilitate themselves financially, as compared to the culture and legislation in a few other EU member states which may seek to punish people who have transgressed financially.

Any insolvent borrower in every EU member nation may want to consider whether or not they may lawfully go after a remedy for their indebtedness under the laws and regulations of a jurisdiction besides their own. And they have the legal right to do so legally under European legislation, subject to certain provisos. Today, the most likely forum to settle on is the UK since that’s the legal system reckoned to be one of the most enlightened and, so far as the insolvent consumer is concerned, usually provides the most affordable, fastest and most satisfactory financial options, primary among them being Bankruptcy and IVAs.



Prior to going forward however, the financially troubled debtor must take into account whether his or her circumstances fulfill several provisos. The key criterion to satisfy is to be able to verify that the debtor’s “centre of main interests” or COMI is within the Britain, taking into account that this might be challenged by among others, lenders. According to EU Regulations “the centre of main interests should correspond to the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties”. This is not surprisingly open to interpretation or challenge but a consensus is beginning to emerge about what this is intended to be. Ultimately, the legal courts make a decision on whether or not a debtor’s COMI has been correctly proven.


The country in which an EU citizen mainly carries out his or her occupation, trade or self-employment will be regarded as their COMI. In case the citizen has no trade or profession, then their country of residence is normally deemed to be their COMI. If the debtor trades in one member state but dwells in another, the COMI is typically considered to be the member state where they trade. If a citizen lives in one member state (where they pay their bills, hold a bank account, purchase goods and so on) and commutes to an alternative member state where they work on a non self- employed basis, then their COMI will normally be the country in which they reside.


The actual date on which a bankruptcy petition is presented is when the COMI is determined. It may be totally different to the place that the COMI was when the pertinent activity was done – i.e. when the indebtedness causing insolvency was sustained. Hence the location of lenders and the country where liabilities were incurred are usually not material factors in determining a COMI. Can a consumer change his or her COMI? Of course they can although it might be challenging it is perfectly lawful to do this. The free movement of labour within the Eu that is a building block of the Eu treaties ensures this. Any citizen of any EU member nation can go to the united kingdom, take up work, and reside there. Their COMI is definitely now in the UK, whatever indebtedness they may have sustained in their home state and they are entirely within their rights to petition for their own bankruptcy in the Great britain or to try to get an other legal solution to their insolvency such as offering an IVA to their creditors. However, it ought to be appreciated that creditors in the debtor’s “home” nation might possibly reject proposals for an IVA, considering the fact that approval requires acceptance by a minimum of 75% of (voting) lenders. However, there is no logical reason why lenders in a foreign jurisdiction should reject a well crafted IVA, particularly if it is the best offer the debtor could make and the best yield that lenders can achieve.


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