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Bankruptcy still a tough option for spendthrift individuals
Published on: 27 May 2004
Latest government figures confirm that businesses have been reaping the benefits of strong economic growth in recent months with the number of companies failing falling to a five year low but personal bankruptcies plateaued at their current record level, prior to another anticipated strong spurt upwards later in the year, making it a tough year for spendthrifts, say Portland Business & Financial Solutions, the south's largest business rescue and insolvency specialists.
The first quarter set of insolvency figures for England and Wales from the DTI show company failures down by 4.6%, on the previous quarter and a decrease of 14.3% on the same period a year ago.
Individual insolvencies were fractionally down on the last quarter but 26.8% up on the same period a year ago. Rising interest rates on top of the current credit card spending boom and the effects of the new insolvency laws introduced in April are all expected to help push personal bankruptcies to record highs in the coming months with all the personal misery that that entails.
"Many people seem to think that the new bankruptcy rules let personal over-spenders off the hook, relieving them of many of the onerous burdens of bankruptcy but penalties have been quietly included to ensure that for some, bankruptcy will prove more painful than ever," says Carl Faulds, Managing Director of Portland, who are based at Whiteley, near Fareham.
"The new rules aim to put an end to the one-size-fits-all approach to bankruptcy, reduce its stigma and separate the "honest" bankrupt from the spendthrift who takes advantage of his creditors and the public. But you will still probably lose your home, your car and most of your possession except the bare basics and you could well have an income attachment order placed on you, which will take a slice of your salary for up to three years to repay your creditors and cover bankruptcy costs," he continued.
For some an individual voluntary arrangement (IVA) may be an option if they can reach agreement with their creditors but for seriously indebted individuals with no material assets and no income, for whom bankruptcy is a blunt, expensive instrument, professionals within the insolvency industry are calling for proposals for a new, lightly regulated insolvency option.
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