Bankruptcy is ‘too easy’
Wellden Turnbull accountants say that changes to the bankruptcy laws announced this month have attracted criticism that the procedure is becoming too easy, with little penalty for individuals who are unable to pay their debts.
Simon Spevack from Wellden Turnbull said “The government has announced that debtors will soon be able to apply for bankruptcy by post or online, bypassing the court system altogether. This follows the recent reduction in the time it takes to be discharged from bankruptcy to 12 months, and this year’s decision by the Insolvency Service to stop publishing the names of debtors in appropriate journals”.
However, critics have argued that with little stigma attached to bankruptcy, the system now provides no incentive for people to try to pay their debts off first, and only use bankruptcy as a last resort.
In addition, easier bankruptcy could result in fewer people using Individual Voluntary Agreements (IVAs), where they enter an arrangement to pay back a proportion of their debts, but get to keep their assets. However, since these must be arranged through a licensed Insolvency Practitioner, they may prove more difficult to arrange than bankruptcies.
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