Bankruptcy 'too easy' claim insolvency professionals

The broader picture

Quite simply, if there is no deterrent to not paying debts then people will not pay.

Bad debts impact heavily on small businesses. Nowadays the first cost-cutting tool used is redundancy so staff become unemployed and they decline into debt default - usually followed by bankruptcy.

If the debt is bad enough then the business folds and the bank goes unpaid.

The bank then tightens its lending criteria, leading to less capital assistance to business. Bank charges also rise to cover the losses. This increase in overheads puts small businesses in a difficult position - pass the cost on the the consumer or face decreased profits?

Increased prices rarely deters irresponsible shoppers, who just borrow more - usually beyond their financial capacity and increasing the consumer debt mountain. They default, go bankrupt and the banks suffer more losses. In response they increase charges and tighten their lending criteria, ad nauseam.

Non-payment of debt is like a hemorrhage, let it get out of control and the patient bleeds out.

Posted by: Chris S , 26 Nov 2009 | 00:00

idiot!!!

being a bankrupt person myself trust me when i say the was no easy choice for me and yes i'm sure SOME people rack up debt knowing they can just file for bankrupcy and this is why the bankrupcy process should be scrutinised. BUT for this ***** to complain that IVA's (which incurs 4K in fees ontop off your debt) may be used less (for whatever reason) is a bad thing seemingly because it'll hit him in his pocket. some people don't use other people's financial woes as a basis for making money.

Posted by: Daniel , 25 Nov 2009 | 00:00

easy way out

Does seem to be the easy way out, but given the entire Nation is in this state does it really matter. If people don't want to pay they do not have to, simple. the answer is "never a lender or borrower be!"

Posted by: Spike , 25 Nov 2009 | 00:00

Banks looting the PUblic is even easier

Banks looting the Public AND the Public Purse is EVEN EASIER ! Those poor casualties of the amoral corrupted Superstate are merely a symptom of the devastating Truth: that nearly all those in Public "Authority" are running corrupted Systems, each protecting the other and collectively protecting the Banks.

Aside from the Royal Charters which allow the 'Establishment' to engage and get away with non-recital and mis-recital (secrets and lies) - which the government are now seeking to further 'protect' by "Law", it is time that open disclosure was ordered by way of a Judicial Review.

And, to cap it all, now that the secret is 'out' that there are at least 36 to 60 Lloyds names who are Judges in our Courts who are seriously conflicted but yet are being allowed to protect the Master Policy....say no more. Except perhaps:-
NEMO JUDEX IN RE SUA.

Posted by: ONEVoiceGroup , 25 Nov 2009 | 00:00

IVA or Bankruptcy

This is a subject which always produces some strong emotions. Most people, quite rightly, see bankruptcy as a serious step and only end up at that point because they are so stress out by creditors and debt collectors or they have tried an IVA and have found that the contributions are just not affordable.
We regularly speak to people who have not had all of their options explained to them by I.P?s and/or they have been put into the position of accepting the nominees assessment of their disposable income, which turns out to be impossible to maintain .
On this site there is a story detailing why some I.P?s are currently taking the view that there is little or no profit in bankruptcy. Are there any I.P firms who steer people towards an IVA because they see a better business opportunity for them?
Daniel quite ably makes the point that the fees charged in an IVA can be high. We have often seen fees far in excess of the £4000 quoted.
What some IP?s fail to make clear to the debtor is that a bankruptcy is often cheaper and quicker than an IVA, both are legitimate solutions to insolvency and are prescribed by the same piece of legislation. Often we are told by the debtor that they were actively dissuaded from bankruptcy by the provision of some information and assumptions which, in the4 final analysis, proved to be inaccurate and in many ways misleading.
An IVA is intended for people who have an asset to protect or their job prevents them from applying for a Bankruptcy Order. We regularly hear from debtors who tell us that they have no asset, most notably they do not own their own home and their job is not at risk. They almost always tell us that they feel the IP they spoke to was less than forthcoming about the bankruptcy option and that had they been given alternative information they would have had all of the options available to them and may have chosen the cheaper quicker option.
Whilst IVA Watchdog believe that IVA?s are a good solution for certain people it often transpires that others would have been better suited to a bankruptcy.
Every business has a right to make a sale to their customers; one has to wonder if some businesses prefer to make the sale to the detriment of the customer.

Posted by: IVA Watchdog , 27 Nov 2009 | 00:00

There IS stigma attached to bankruptcy!

Having been made bankrupt in the 80's and having had it forced on me by a bank, affected me for 10 years afterwards.

Even although the BR was in 1988 and I was discharged in 1993, the fall-out lasted well into the 90's.

Try obtaining credit, running a business, or dealing with financial institiutions whilst bankrupt or even as a former bankrupt and you will easily find where the stigma comes from.

In 2007, my bank of 5 years history asked me to produce documentation from 1993, in order to increase an overdraft from £500 to £750.

JB
PS Please attached Stigma!

Posted by: John Baker , 28 Nov 2009 | 00:00

Easy way out

Going for the big B is not usually an easy decision to make. For the conscientious person, obviously there are those who will play the system (as there are with the more gainful aspects of finance). Having struggled to keep a business going for 4 years (at the start of the recession), in the hope that it might get better I ended up in a psychological paralysis - I knew I had to make the decision, and once I had made it, it actually took me months to get around to filling in the forms. The inner torment was horrendous, the fact that the majority of my borrowing had come from family rather than the banks (because the banks reneged on their initial agreements which left me with no operating capital), I was hit again by the government (The MoD didn't settle an account for over 18 months, and it took letters to the Secretary of State to initate a payment).

This article should not be read as an attack on the individuals facing bankruptcy as much as a warning to the folk who earn a living from IVAs that they themselves may not be immune to the issues and may need to take their own advice - I have, this week, seen two street front windows where the Financial Advisors that once occupied the facade are no longer trading. The BIG W is in progress, so the number of BIG B's will surely increase.

There needs to be greater support for those who have made the decision and are living with the consequences.

Posted by: Russell , 03 Dec 2009 | 00:00

Perhaps it will force banks to lend more responsibly

As a Licensed Insolvency Practitioner of over 20 years standing, I have to agree that bankruptcy is easy. But I disagree with the sentiment that it is too easy. There are, after all, implications a good many years down the line.

I also think it should be relatively easy, that way the banks will be forced to lend responsibly. The banks have shown themselves to be absolutely awful at limiting their excesses through self regulation, so perhaps hard lessons learned from practicalities will curb their enthusiasm for lending and encourage success and the economy to grow through hard, profitable, graft rather than unsustainable borrowing.

Posted by: Paul Brindley , 02 Dec 2009 | 00:00