Insolvency practitioners from Grant Thornton believe the Act, which is designed to speed up the rescue culture and deliver better returns for creditors, will result in many people declaring themselves bankrupt, without realising the implications of doing so.
Under the Act, those deemed ‘innocent’ bankrupts will only face restrictions for one year, plus major assets such as their homes will be protected, but those deemed ‘culpable’ could face restrictions for up to 15 years.
Only a few entrepreneurs will benefit from the legislation, the firm said.
Instead, it said the Act would ‘open the floodgates’ to thousands of bankruptcy applications from individuals with consumer debts, this at time when consumer debt in the UK is at an all time high, with it not being uncommon for people to have personal debts of as much as £100,000, compared with an average of £30,000 to £40,000 three or four years ago.
Mike Gerrard, a personal insolvency specialist at GT, said: ‘Individual debt in the UK has spiralled out of control with over 75 people going bankrupt every day. The soon to be introduced measures which will make bankruptcy easier, could be too tempting for too many individuals, who, ignoring the very serious consequences, may see bankruptcy as a relatively painless get-out clause.
‘Whilst the Act will probably be successful in achieving its aim to get what is a small number of entrepreneurs back on their feet more quickly and with much less stigma, it could encourage many others to take on unmanageable levels of debt knowing there is an easy exit for them in due course.’
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