Proposed changes to personal bankruptcy law could trap debtors in long-term agreements crippling them financially for years, according to ICAS and insolvency trade body R3.
say that a proposal to base repayment contributions on a fixed percentage of an
individual’s income without assessing their circumstances, could unduly impact
upon the poorest in society.
They are concerned
it will leave individuals unable to meet day-to-day living expenses simply to
finance historic debt.
The proposals to
set a minimum dividend payment of 50p in the pound through the Protected Trust
Deed (PTDs) scheme will also have a significant impact.
minimum dividend of 50p is unrealistic and could deprive debtors and creditors
of the useful PTD option.
Debtors may face
decades of poverty as a result of these proposals by the Accountant in
Bankruptcy (AiB). Significantly extended repayment periods are likely to
restrict a large number of Scots to a life of limited credit and large
Chair of the ICAS Insolvency Committee and a corporate recovery partner with
PKF, explains: “These changes will benefit nobody. It is unlikely that
creditors will see an improved return. Debtors will be tied to debts for many
more years than at present, unable to experience financial stability for almost
a decade. Society will not benefit from losing hundreds of thousands of
consumers who otherwise might be able to spend money improving the economy.“
“Nobody wants to
let debtors off the hook, particularly if they are able to pay, but these
changes could punish individuals for a considerable period of time for debts
which may have been run up due to unforeseen circumstances. Perhaps what people
don’t always appreciate is that the most common reasons individuals become
indebted is due to ill health, redundancy, and divorce and not always financial
Scottish R3 council member, comments: “Given that many Scots are simply
surviving at the moment by only paying the interest on their debts and that
tens of thousands are being made bankrupt each year, it is questionable whether
now is the right time to make the conditions even tougher for some of the most
vulnerable people in society.”
changes have not been welcomed by creditors or consumer groups and will have an
adverse impact on the Scottish economy at exactly the time when it needs a
Chair of R3’s Scottish Technical committee, comments: "The proposal to
introduce several new personal insolvency "products" will make the
system unnecessarily complicated with no discernible benefit to debtors or
creditors. Additional cost to the public purse and the potential for
manipulation or abuse of the system are also concerns which have been raised.
“The proposal to
remove creditor driven petitions from the courts is also very worrying.
Bankruptcy significantly impacts on an individual's rights and property and
deserves to have the scrutiny of the courts"