Better safe than sorry: Why you shouldn’t rely on insolvency factories that treat small debtors by mass processing?

A simple search in Google with the relevant search terms is enough to get a colorful variety of “experts” on the US insolvency presented. We also call these agencies “insolvency factories”, because the business model of these consultants is to lure as many debtors as possible to process them in the bankruptcy proceedings there using mass processing.

This route to debt relief may work for debtors with comparatively low debts (although we generally question whether going abroad is even worthwhile with low debts). The fact is that a creditor bank does not go to great lengths to track down a debtor who lives abroad because of debts from a new car financing of $ 20,000.

For hiring a bankruptcy attorney, click here. The US bankruptcy attorney insolvency advisor benefits from the fact that with low debts neither the creditors nor the authorities look particularly carefully. It is not so much the sophisticated service or the enormous specialist knowledge of the consultant that saves those affected, but simply more luck than brains. Probably he would have achieved the same result even without a consultant.

After all, 90% of the Americans affected by bankruptcy can do without a lawyer or advisor. With a little initiative and the will to learn, you can do it yourself as a foreigner.

But what if you have very hollow debts? Liabilities of over 1 million dollars? Well, of course, things are different. You’re in a different league and believers are far less relaxed. Then the US authorities take a particularly close look. The Official Receiver even has special departments for debtors with complex asset and liability structures.

The fact is that most of the so-called insolvency advisors have little idea how to deal with more complex and extensive liability structures. The otherwise so simple run-of-the-mill process can hardly be run through for debtors with high liabilities. Consultants deliberately downplay this risk.

We therefore strongly advise against opting for a consultant without careful consideration and examination in the case of high liabilities.

On this page, we present seven facts about EU insolvency directly from our consulting practice, which particularly affect clients with high liabilities.

Fact 1: Your Facebook profile is more important than your Limited employer’s pay slip

Anyone who prefers to have clear structures and guidelines and who can work through them like a checklist. The thinking of Americans is based on rules. The Americans, on the other hand, think in principles and this is how their legal system works.

The windy insolvency advisor does not fully understand the Americans and their legal system at all. So the customer who wants to go through the EU bankruptcy is given a checklist: Get yourself a room, an account and we will produce a few pay slips for you and you will be fine.

But as I said, the judge or the trustee is only of limited interest. If the attorney of your creditors presents photo evidence that you are still intensively in your home country, it will be decided that the center of your life is not outside the US.

The judge or bankruptcy administrator knows that anyone can rent an apartment and open an account, I don’t have to be in the US for that. Keeping a Facebook profile up to date for months – that is much more difficult to simulate.

How does the lawyer get your photo evidence? Via your Facebook profile! (We only use Facebook as an example for social media in general.)

Now you can of course argue that you do not have a Facebook profile or that it would be best to delete or deactivate it. But how likely is that nowadays? This is reminiscent of the debtors, whose bank statements show no transactions and who then claim that they always pay in cash.

You see, nobody can do that for you, or at least make you extremely suspicious.

Or to put it another way: A nice Facebook profile with lots of pictures from London and Dublin in the pub, in the museum, in the park can cure many other deficiencies in your setup.

Fact 2: You must actually live in the US and your family must move with you

Please do not be under any illusions: you will have to move to the US with the whole family, unless you get divorced. The judge laughs at you when you tell him that you separated from your wife at this very moment after 25 years of marriage and will tell you that he hears every day from debtors who want to apologize.

Believe me, I’ve seen clients cross-examined for eight hours by opposing attorneys into the details of their alleged breakup. They are absolute professionals. You won’t get away with it. At some point in this situation everyone becomes entangled in contradictions.

In the first step, really moving means informing all friends, relatives, customers, suppliers, employees and all other important people that you are moving to the USA with bags. It’s best to throw another huge farewell party.

You have to stage this move in a big way. Forget about discretion. Nobody needs to know why you are moving to the USA. If so, the majority of you will have to live in your new country of residence until further notice. You are welcome to travel to some other country for a day or two every week. Periodically, certainly for a longer period of time. But everything else? Difficult.

Fact 3: You must actually develop a professional or business activity in the USA

You are shifting the focus of your economic interests and you have to act accordingly.

Actually carry out the activity you specified there. Build a Business. Refer customers. Visit suppliers. Open up the local market.

It is important that you document everything: e-mails, pictures, documents – print everything out and store it nicely. If the judge or the insolvency authority asks you what exactly you are up to in your adopted country, show this folder and you will be surprised by the effect.

Make sure you can report on your work in glowing words. Make sure the job has a strong local focus. Show that this activity can only be carried out locally.

It looks particularly bad if the company you are employed by has no website, there is no professionally answered phone and there are other employees who are also affected by the bankruptcy (which many insolvency agencies do the same).

Fact 4: You have to develop and demonstrate a lively social life 

Please do not try to mislead anyone that you are someone who never leaves the house and only sits in front of the television at home.

When submitting an application, you must provide at least three written testimonies from people in your social circle who live in the USA, confirming that they know you and that you have regular time with you.

The whole process depends on these testimonies. The judge or the bankruptcy authority will make it dependent on whether you live in the USA and whether you can go through the local procedure or not.

Anyone who has lived in the USA for several months and has not met at least three people makes themselves as implausible in front of the authorities as someone who always pays in cash and does not have a Facebook profile. Unfortunately for some candidates all three criteria apply.

Suitable witnesses include: golf partners, shopkeepers, your pub buddy, mistress, customers, business partners, landlords, gym friends, fellow believers, etc.

So make a firm commitment to make appropriate acquaintances, hopefully far more than three. You can’t afford to be a social grouch. Go out, enjoy your time in your adopted country and make new friends.

Fact 5: Your creditors willingly give up $ 100,000 on a lawyer

Clients often underestimate how far their creditors will go to undo a possible EU bankruptcy. We have seen several cases where banks have spent well over $ 100,000 on lawyers in the USA respectively.

What can the lawyers do? Well, for one thing, weaknesses in your application can be identified. Did you forget to name an account or did you give other facts incorrectly? What may be a fleetingness, the opposing lawyer will consider attempted bankruptcy fraud and name perjury (because you swore that the application was correct)

The other starting point for the lawyer is to try to question the center of your life in the USA. What do you think we have already seen in this regard: from private investigators, permanent shadows and incorrectly delivered packages to threats from witnesses, etc.?

Some creditors take your move abroad personally and are always keen to set a precedent. Don’t underestimate the determination of your creditors.

In another case, a client living in the USA had tax debts with the tax office. Unfortunately for him, the client was chronically ill and saw a doctor almost every week.

The tax office then went to the treating doctor with a search warrant and had all the client’s documents handed over to them. Due to the many visits and the ongoing ties to the USA, the judge refused to open the proceedings.

Do not underestimate the creditors! Especially not those who have the necessary change!

Fact 6: Your pension is at risk

The US liquidator has three years to realize your assets and distribute the proceeds to the creditors. Realistically speaking, you will pay a small contribution from your small salary to the official receiver for three years. Let’s say $ 100 a month.

In the case of a pension, however, this is different – at least if you are unlucky.

Some private pensions are fundamentally protected from access by an insolvency administrator. You don’t have to worry about them, provided that the manager of your pension has confirmed that the pension or private pension is inviolable.

If the pension is not protected and you are already receiving pension payments, the bankruptcy administrator can seize them for the rest of your life.

And why?

Because the pension is added to your assets that existed at the time of the bankruptcy and which you can now dispose of.

You will have a rude awakening to the discovery that while you have successfully gone through the US procedure, you will be bleeding for the rest of your life.

Fact 7: A quick return to the home can be fatal for you

Clients who return to US as soon as possible make it easy for their creditors to contest the US insolvency. It is immediately assumed that you never really lived outside the US and that your center of life was there.

Please wait until you return to the US until the discharge of the remaining debt has been legally recognized at home. Specifically, this means that you are applying for recognition of the discharge of residual debts. 

It would be a shame if all the effort was wiped out at the last step in the process.