BusinessBusiness RecoveryStudent bankruptcy loophole

Student bankruptcy loophole

A government clampdown on students who use bankruptcy to clear university debts will come too late to prevent hundreds taking advantage of new rules that shorten the process to a few months, experts have warned.

Link: Student bankruptcies treble

Under the Enterprise Act, from April this year it will be possible to wipe out university loans through an expedited bankruptcy process that takes 12 months or less instead of the current three years.

Insolvency specialists warned this week that a five-month gap between the introduction of the new regime and the exclusion of student loans from bankruptcy – due to take effect from September – could make the recent leap in student bankruptcy look mild.

David Ingram, a partner at Chantrey Vellacott, said: ‘This is likely to result in a huge increase in the level of bankruptcies, particularly among students.’ He said the 900 students who were declared bankrupt last year were likely to prove ‘the tip of an iceberg’.

The education department, which is responsible for the Student Loans Company, refused to say whether it was aware the reforms could prompt a further surge in student bankruptcies.

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