Bankruptcy Laws too Lenient

According to the results of a recent survey carried out by the insolvency trade body, R3, over half the population believe that bankruptcy should last longer than a year.

During the tough economic climate, it would appear that attitudes towards bankruptcy have hardened with the results of the survey showing that eighty-two percent of those who participated saying that some people take advantage of the bankruptcy system to write-off debts they’ve built up due to reckless spending.

The survey also found that sixty-four percent of respondents feel that bankrupts should be treated differently depending on their prior spending habits.

Following the survey, R3 president, Lee Manning, said: “Our bankruptcy regime, lasting only a year, is quite lenient compared to other countries.

“While no-one is advocating a return to the ‘debtor’s prison’, there is a strong feeling that a debtor’s spending behaviour should be factored into the length of the term of bankruptcy.

“Perhaps fuelled by stories of celebrity debtors, there is support for a move to distinguish the genuine hardship case from the reckless spender.”

Mr Manning added: “Currently, the actual term of bankruptcy cannot be extended for reasons of reckless or blameworthy behaviour prior to bankruptcy. Although a Bankruptcy Restrictions Order (BRO) can be imposed to extend the restrictions of bankruptcy for between 2 and 15 years for culpable behaviour, a BRO does not increase the bankruptcy term.

“This means that any assets acquired by a reckless spender after their 12 month term of bankruptcy, even where they are subject to a BRO, can be retained by that individual rather than helping towards paying back their debts. Only by extending the term of bankruptcy, not just the restrictions, can we really hope to deter reckless spending”

Posted in Blog, Business Technology.