PracticeConsultingThe hidden toll of bankruptcy

The hidden toll of bankruptcy

One third of individual bankruptcies lead to someone else going bust, according to research by the Society of Practitioners of Insolvency

The SPI said the financial misery of insolvency often spread far wider than the initial individual involved. Those closest to an insolvent were the most likely to be affected. The survey found that the average insolvent was 42, married with an income of #19,820.

But SPI president Murdoch McKillop, who is also a senior partner at Arthur Andersen, said despair could be avoided if businessmen took greater control over financial affairs.

He said 40% of small business failed because their owners did not manage cashflow properly. ‘The principal reason, in 33% of domestic cases, was failure to manage money. Financial management ought to be within the control of an individual,’ McKillop said.

The survey also showed that up to 30,000 jobs each year are put at risk by small businessmen who become personally insolvent. One in five personal insolvencies occured in businesses of three or more employees. In 49% of such instances, the knock-on effect involved a person neither related to nor in business with the original debtor.

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