In its recently launched consultation paper, A Choice of Paths, the department for constitutional affairs sets out to tackle over indebtedness by creating three categories of what we commonly know as ‘skint’.
First are the can’t pays, then the won’t pays and finally the could pays. Put simply, the government proposes to let the can’t pays off, get tough on the won’t pays and reform the way it deals with the could pays.
Could pays will be able to apply for enforcement restriction orders giving them a six-month ‘breathing space’ to recover from setbacks such as divorce.
Sound good? Some IPs are worried it could be just one more acronym to add to the alphabet soup facing bemused debtors.
Mike Gerrard of Grant Thornton warns another court process is an ‘unattractive’ way forward and argues that reputable creditors are flexible about negotiating repayments anyway.
Steve Treharne, head of personal insolvency at KPMG, agrees, fearing the courts could become ‘snarled up’ with people striving to stave off the inevitable. He argues that developing existing procedures ð particularly individual voluntary arrangement ð is the way forward.
The government must have some sympathy for this position. It plans a working party to consider reform of the IVA later this year. That begs the question of what it is doing further muddying the water with its latest proposals.
Fortunately, the government has come up with a sensible idea to overcome any confusion ð a ‘gateway’ helpline for those in debt. The problem is, a gateway is only as good as what lies on the other side of it.
What nobody seems willing to do is tackle over-indebtedness at source, with a crack down on irresponsible lending, rather than engineering yet more ways of picking up the pieces.
The consultation closes in November. When the time comes to judge the government’s attempts to resolve the debt crisis, one fears the conclusion may be: that it should’ve and it could’ve but it wouldn’t so it didn’t.
- Brian Moher edits the business recovery page
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