Thursday, Jan 17, 2008
No upper limit on which a borrower could stop making repayments proposed !
Times online: Government's court order plan will allow people in debt to keep their creditors at bay
The Ministry of Justice announces the biggest shake-up in personal insolvency laws for years, which will permit borrowers to take a "repayment holiday". Borrowers will be allowed to stop repaying debts by taking out a court order, under radical plans outlined yesterday by the Government. The proposals would mark the biggest shake-up of personal insolvency legislation in years and come at a sensitive time for the financial services industry, which is bracing for an increase in consumer bad debts.
Posted by jack c @ 09:36 AM (1139 views) Add Comment
16 Comments
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1. hpwatcher said...
The effect of that, I think, will mean lenders willl be very, very careful who they lend money to.
It will be very nice for some, 1 year without paying anything...but what about the additional interest?
2. Ian said...
This measure will encourage dodgy debtors to default and will in turn make lenders ever more wary which will exacerbate the long terms effects of the credit crunch. This is another example of the crass stupidity and incompetence of the present government.
3. becky said...
I think the government saw this coming a long time back, realised increasing debt couldn’t go on for ever but hoped it would all end on someone else’s watch. And of course now the end seems to be nigh they are trying to take measures to avoid huge numbers of bankruptcies and/or mass defaults. Same goes for the simplified IVA. After all, why would any government friendly with the City and big banks waste their time passing legislation making it easier for people having trouble with debts unless they had a good reason (or suspected they might in the future)?
4. Landedgentry said...
Unbelievable
I feel sorry for the lenders as Im completely in favour of usury.
5. sold 2 rent 1 said...
We really are entering into a new era.
The 1930's debt bubble was purged with a depression.
It seems this debt bubble will just grow and grow and grow.
Maybe when it finally bursts in 2010-11 we really have a point of singularity - where there is a complete break with the past.
6. jack c said...
HP & Becky good points - the lenders will become even more reluctant to lend and push up rates to counter the loss of revenue from those on "payment holidays" - seems likely it would make matters worse in the long run.
There are also some interesting comments at the bottom of the article posted by Times readers including one which reads "I'm for gettting out of sterling and into gold - this economy and fiat currency is finished. Probably by design"
7. Afrobaggie said...
S2r1 - I am not entirely convinced by your gloomy prediction - although it is becoming more compelling by the day - but what exactly would be 'a complete break with the past'. Should the singularity occur what are the possible outcomes? A big bang in the financial universe is an opportunity as long as you are able to take advantage, and the best way is surely to understand what could happen. So what are your (or other bloggers thoughts)?
8. Orwell said...
From the same article, a good point:
Quite simply he won't be able to without interest payments being made on at least the capitalalised amount (as with any large amount such as that represented in a house).
He obviously has very bad lawyers advising him, but then one may suspect that the front bench were never up to much, hence the reason they went into politics in the first place.
Article 1 of Protocol 1 protects the right of property (including loan capital and interest). The European Convention of Human Rights makes it quite clear that the ECHRR will look at the realities of the situation and not the label. Is anyone seriously going to say that deprivation of interest is not a de facto deprivation of property?
Or of course is someone else going to pay for this?
Pete Balchin, Solicitor , Bristol, UK
9. happyrenterz said...
I agree lenders might think twice before lending recklessly and this might actually be good news. This reckless lending is the main reason we have so much debt in the first place. Without it we will get a wave bankruptcies and IVA's which might just tip lenders over the edge because they take a hit and have to just write it down as a loss. I wouldn't be surprised if the banks didn't cook up this "government plan" in the first place because they are scared of mass debt defaults in the UK in the next few years. This means people in debt don't get off the hook so easily but get extra years to pay it back. The downside is that we don't get the short sharp collapse of spending to purge the system with a bounce back in spending after that as S2R pointed out.
10. An Bearin Bui said...
It's probably intended to put a brake on bankruptcies and make it easier for people to get their lives together and then pay off debt. It actually works in favour of the banks because it will reduce their bad debt liabilities. It also DOESN'T include mortgage debt so it won't stop anyone who has massive mortgage arrears going bankrupt. It's really just a stopgap to halt an explosion of consumer debt over the next few years. God forbid anyone would regulate lenders and force them to use proper checks and control credit availability!
11. cornishman said...
What a good wheeze to stop any nasty headlines about increasing bankruptcies before the election next year...
How long can this fiddling go on for?
12. mrmickey said...
I think you will find that this is only for credit card debt and small loans and the payment holiday only lasts two months and I think you will need a pretty good excuse to ask for the holiday.
13. justwatching said...
Yet another load of utter chaff. I read 1/2 of article, 'repayment holidays of up to a year' enough.
So you still own the same amount, sorry, more because interest is added.
Double chaff, I know lets massage the IVA statistics for another year.
14. justwatching said...
Triple chaff.
'council tax arrears probably excluded', gordo gets his cash then
15. sold 2 rent 1 said...
Afrobaggie,
Predicting the future has always been tough, and it has never been tougher than now.
Prediction's that turn out to be correct in 5 years time will be ridiculed today for sure.
Humans almost always extrapolate the current conditions into the future.
I am all for “exponential evolution” where we have been evolving our consciousness exponentially since the Big Bang on a schedule unknown to us.
I am watching the latest developments on quantum physics with great enthusiasm
Parallel universe proof boosts time travel hopes
http://www.telegraph.co.uk/earth/main.jhtml?xml=/earth/2007/09/21/sciuni121.xml
The very first time machine – Ronald L. Mallett
http://www.youtube.com/watch?v=yYOjYU2GKA0
Large Hadron Collider
http://en.wikipedia.org/wiki/Large_Hadron_Collider
16. talking rot said...
I have not had enough time to read the article in depth - merely a quick scan. However, it isn't law yet? Does any one believe that it will become law, 'cos I don't.