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http://news.independent.co.uk/business/new...sp?story=563296

Bankruptcy overhaul mooted as too many walk away from debts

By Jason Nisse

19 September 2004

The Government is considering a radical shake up of bankruptcy laws because of worries that its attempts to take the stigma out of being bankrupt have led to a massive rise in people walking away from their debts.

Two separate consultations have been launched to see whether rules, which only came in with the Enterprise Act last year, need to be changed. The Act brought in a faster bank- ruptcy procedure, which can see someone discharge their bankruptcy in only a year. This was trumpeted by ministers as taking the stigma out of bankruptcy, and promoting a risk-taking culture.

However, there are fears this has backfired following the massive rise in personal bankruptcies. A record 11,200 filed for bankruptcy between April and June in England and Wales, a third more than for the same period in 2003.

One of the consultations is being run by the Department for Constitutional Affairs, and among the issues it is asking experts to look at is how to deal with the so-called "No income, no asset" bankrupts who become over-indebted and use bankruptcy to escape their obligations. One plan is to have a debt-relief service to which people who are overstretched have to go before they can be declared bankrupt.

Another proposal is for an Enforcement Restriction Order, covering people who may be able to deal with their debts in the longer term, but cannot pay in the short term. Other plans include reforming the court system for enforcing debts and strengthening private and voluntary sector repayment schemes.

The other consultation is through the Insolvency Service, part of the Department of Trade and Industry. It is scrutinising individuals' voluntary arrangements - deals struck by debtors with their creditors to try to avoid bankruptcy. Many in the insolvency arena are worried that these processes are too cumbersome and time-consuming and that people find bankruptcy an easier option.

"The IVAs are complex and expensive and not really any good for the consumer debtor," said Pat Boydon, a partner at PricewaterhouseCoopers.

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The new bankrupcy rules certainly have taken the stigma out of bankruptcy.

I myself are laughing. I have walked away from £20k that would have otherwise taken YEARS to pay back.

Those with little or no assets like myself (early 20's) can walk away from that sort of figure in under a year, then rebuild a credit by the time we are middle 20's.

I have to add my circumstances were not due to excess, but the ruling has helped and to rebuild a life a lot quicker.

For those facing the possible wave of mass repossessions like the early 90's, the new bankruptcy will be of great assistance.

It makes you wonder, what are Nu-labours architecture plans that are out of sight??

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Whilst it does allow you to rebuild a life faster (I have friends who went bankrupt in the last crash under the ten year rule, they were in business). It does allow people to walk away from obligations, as you said it would have taken years to pay off, now you just walk away.

Yet somebody somewhere will have to pick up the tab for these debts they will get passed on in interest rate rises etc to other consumers with loans, credit cards mortgages etc; as the banks do not like to loose.

The current debt burden made possible by an easing of credit rules, in conjunction with an easy way to walk away from your obligations could cause if it continues at the current rate many problems for the economy. Instead of a nation of hsopkeeper we may well end up with the highest level of bankruptcy per head of population. A nation of bad debtors.

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If i go into a record store and walk out with the latest cd without paying for it is theft and should be prosecuted for it.

If i go into a record store buy the latest cd on my credit card knowing full well i will not be paying the bill because Iam declaring bankruptcy.

to me i dont see any difference

The rule is if you want the goods you earn the money and pay for them or borrow the money and pay interest. walking away from debt in this circumstance is shameful and should be treated as such

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Good point Crystal Ball, there are laws against a ltd company trading while technically insolvent, but it doesn't seem to apply to individuals consumer spending.

Taking another view, maybe a mass debters flash mob bankruptcy protest would teach the banks a lesson for loose lending. But as someon else mentioned on HPC forum, the banks have passed this liability of the debt on to other firms in the credit market this time around, having been burnt in the last recession.

A poor credit rating can be postive in the sense of going 'cold turkey'. If a consumption junkie can't borrow it, they can't spend it.

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It has often occured to me that if I was penniless I would probably borrow as much as I could in one week and go to las vegas and stick it on red. Or place a spread bet on the Dow Jones. 100 points up you double your money, 100 points down you lose the lot. You have a 50% chance of making as much as you borrowed, tax free and paying off the debts and a 50% chance of simply strolling away.

Tempting is it not?

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Guest Charlie The Tramp

Quote: xavierpj Posted on Sep 19 2004, 05:41 PM

Those with little or no assets like myself (early 20's) can walk away from that sort of figure in under a year, then rebuild a credit by the time we are middle 20's.

You will be surprised how you will be blacklisted by the lenders, banks, and credit card companies for a very long time after the twelve month period has ended.

The only credit you will get in the future will be secured.

Hell hath no fury than a lender knocked. :(

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Charlie The Tramp Posted on Sep 19 2004, 09:05 PM

You will be surprised how you will be blacklisted by the lenders, banks, and credit card companies for a very long time after the twelve month period has ended.

I don't plan to stay in the UK in any case... As a nurse, it is your ticket anywhere in the world

It is possible to build up your credit rating again but it does take time. Even if I did stay in this country (which I would be mad to do so) I wouldn't be able to afford a mortgage for a very very very long time, if ever, on an £18k p/a salary in the south. By such a time my credit rating would be up to scratch once again.

Take in to account pre-bankruptcy : no defaults and a superb rating, and post bankruptcy only two defaults with two creditors. Upon discharge to run my credit perfectly, there is no reason that I would be unable to build up a superb rating yet again.

I have been told : It is important to change address at appropriate points post bankruptcy so the address cannot eventually be associated with oneself and the bankruptcy? can any one shed any light on this, as I am dubious?

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Guest Charlie The Tramp

Quote: xavierpj Posted on Sep 19 2004, 09:56 PM

I have been told : It is important to change address at appropriate points post bankruptcy so the address cannot eventually be associated with oneself and the bankruptcy? can any one shed any light on this, as I am dubious?

Knew a bankrupt who went to the states to live and work.

After a couple of years decided to buy a property on a mortgage, as a UK citizen he had to give information on his UK bank and previous UK addresses. References and checks were carried out and his passed problems once again came to the fore.

Many of the credit reference agencies now work with their overseas equals. :(

As I said in my previous post

Hell hath no fury than a lender knocked.

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Guest Charlie The Tramp

Quote: crystal ball Posted on Sep 19 2004, 10:28 PM

so how long would you say you can shake off your bankcruptcy status even if it follows you around the world especially with new communication .

As long as it takes for new lenders to give you another chance.

Some will be more understanding than others. :(

Remember all lenders like to see a track record.

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If my friends experience is anything to go by it takes well over 6 years after discharge from bankruptcy for you to start making inroads, up to that point you are considered "high risk" and so have to pay higher interest rates etc.

HPI was often the only option open to them as the credit is lent against the item rather than the person, even after discharge you still have to decalre that you have in the past been bankrupt and you will need to supply a certificate of discharge to show that this is indeed the case, they cost about 50 quid a throw and each lender requires a certificate not a photocopy.

Even with an "after event" good record its still virtually impossible for them to get a mortgage with any lender other than their bank. I guess you could say it never leaves you.

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Guest Charlie The Tramp

Quote: statscat Posted on Sep 19 2004, 10:38 PM

I guess you could say it never leaves you.

Sadly statscat you are correct.

I hope people don`t think this is an easy way out of debt, personal bankruptcy can be more a stigma than company bankruptcy. :(

For the sum of £2-50p you can check your credit rating at www.equifax.co.uk ,

and see any marks against you, most lenders use this credit agency.

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I'll wait to see what happens. I plan to work in Australia (when I qualify) , by which time the crash (hopefully) will be well underway over here. There are many nice places to rent out there for reasonable money. After living and working out there for say 5 / 10 years with a once again impeccable record and a better nurses wage relative to living, it seems unlikely that a lender would be delving back to the UK especially as after a certain time I can apply for citizenship

In ten years time I'll only be 33... a long time in a new country, settled by that point, a respected career with a respectable income and any credit rating over there would be impeccable.

I've no plans to remain in this country.

It'll be very interresting to see what happens! I'd love to let you all know how it pans out :

- To get away with bankruptcy over here, and walk away from thousands to then get a mortagage years later the other side of the world.

By which point the worlds economy will probably be a different playing field and the world itself a different place as each decade undoubtedly is.

Anythings possbile... even bLIAR is still in number 10.

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Guest Charlie The Tramp

xavierpj

I wish you well and hope your new life fulfills all your dreams.

Your experience I hope has made you a more sensible and mature person.

Remember Charlie`s signature

Never a lender or borrower be only for a mortgage to buy your home, unless you win the aussie lottery before TTRTR gets there first. :D

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"Lost debt" is not passed onto the borrowers!!! That is illegal!!!

A risk element is already paid on all loans(that is why high risk lenders charge more interest. The bank predicts how many loans will default before hand and charge borrows a rate based on that. So when someone does not pay back their debt it is already accounted for. (The same way you buy five wheels for you car even though you only need four!)

Also if you are not happy at paying off someone elses debts then don't borrow money in the first place!.

Nuff said;)

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"Lost debt" is not passed onto the borrowers!!!  That is illegal!!!

A risk element is already paid on all loans(that is why high risk lenders charge more interest. The bank predicts how many loans will default before hand and charge borrows a rate based on that.  So when someone does not pay back their debt it is already accounted for. (The same way you buy five wheels for you car even though you only need four!)

Also if you are not happy at paying off someone elses debts then don't borrow money in the first place!.

Nuff said;)

It is not passed on directly but as you yourself so aptly put it the risk level may well go up for customers that are entering the borrowing market (whether that be loans, mortgage, credit card etc) as the bank simply put has to answer to the shareholdres who do not really want to loose value due ot bad debt (so somehow they will try ro make up the difference).

As for your comment re borrowing money, I have none borrowed and have no requirement to borrow in the forseeable future so your assumption was shall we say lacking in substance and hence I won't pay a premium for others peoples behaviour, as I won't be the one borrowing.

There is a debt bubble, its been discussed on here often enough. The effects of allowing people to negate obligations by in essence making bankruptcy easier have yet to be seen and its affect on financial and other such institutions have yet to be realised (as well as the effect on the individuals that take these steps).

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I'll wait to see what happens. I plan to work in Australia (when I qualify) , by which time the crash (hopefully) will be well underway over here. .

Australian immigration will check you credit rating before awarding a VISA also many jobs and more and more companies will check your background as a pre-employment procedure.

You are going to have a lot of explaining to do or evasion before you can cover bankruptcy tracks especially in these days of computerised record keeping.

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Guest Private Fraser

Quote: statscat Posted on Sep 20 2004, 12:07 AM

The effects of allowing people to negate obligations by in essence making bankruptcy easier have yet to be seen and its affect on financial and other such institutions have yet to be realised (as well as the effect on the individuals that take these steps).

The lenders memories will be long and unforgiving. :(

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Gerd Mueller Posted on Sep 20 2004, 10:26 AM

You are going to have a lot of explaining to do or evasion before you can cover bankruptcy tracks especially in these days of computerised record keeping.

My career goes very much in my favour. Nurses are a in huge demand the world over and this is set to increase, not decrease. Being a male nurse further increases demand as we are a very rare breed. Even working within the NHS on 'bank shifts' while doing my training, I am freqently offered jobs for when I qualify.

Visa applications as a Nurse are fast tracked for Australia, even though they may well do a credit check, my job is one that warrants fast-tracking.

Many newly qualified Nurses are heading out of the UK for a better life, surely a sign that the NHS does have a crisis. We are poaching nurses from South Africa / India, yet many of our own workforce is heading elsewhere or into other careers

With demand as it currently stands around the world, it is very unlikely that I would be turned down for a visa, especially as my CRB check is whiter than white.

It is true that many companies do a credit check pre-employment, but not in the caring profession in the UK. The NHS is not interrested in peoples personal financial positions.

Bankruptcy is better for some and worse for others, it is depends on numerous factors... where you are in life, the assets you hold, your job and also your aspirations.

In my shoes, I can honestly say that bankruptcy has been a god send, whether I can still say that in another few years will be another matter. I love my job, and it shows, but with the doors my job opens, Bankruptcy is more of a small stone my your shoe rather than a brick wall.

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and more and more companies will check your background as a pre-employment procedure.

In the UK that will mean at least half of companies won't bother:

Senior City of London detective points to dangers of unvetted staff, Telegraph. 31/08/2004

....Meanwhile, a survey published today showed that although owners of smaller independent businesses now considered fraud to be as great a threat to their companies as burglary, few had taken precautions to avoid it.

Accountants MacIntyre Hudson said that of 200 owner-managed businesses asked, 38pc see fraud as the biggest threat facing their companies, with 27pc fearing the fraud could come from their own staff. The survey found that only 26pc of managers require that cheques have double signatories, while just 34pc check whether their incoming staff have criminal records.

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Knew a bankrupt who went to the states to live and work.

...... References and checks were carried out and his passed problems once again came to the fore.

Many of the credit reference agencies now work with their overseas equals. :(

I would be extremely surprised if this does not happen post 911. Tracking global money flows constitutes (the only?) one of the most effective ways of countering terrorism and any banks that didn't have this facility 911 would most surely be required to have it now.

Bakruptcy is only apparently attractive. In a credit crunch when people need credit, previous bankrupts will be denied. With little by way of previously imposed financial discipline to control their spending patterns, bankrupts are seriously ill-prepared for any future credit shock.

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Guest Retired Pensioner
Quote: xavierpj Posted on Sep 20 2004, 11:20 AM
Visa applications as a Nurse are fast tracked for Australia, even though they may well do a credit check, my job is one that warrants fast-tracking.

Although the Australian Government may allow you to live and work there, it is private lending institutions who will consider you for future credit.

They will look at why you walked away from your debts, the fact British Taxpayers paid for your training and you emigrated giving no service to your sponsors in return.

It`s a matter of your charactor and values they will be looking at.

You may well be looking at renting for a very long time out there unless the Government offer loans and mortgages to ex bankrupts in professions they require.

Lenders do not lend on sentiment. :(

With little by way of previously imposed financial discipline to control their spending patterns, bankrupts are seriously ill-prepared for any future credit shock.

Sledgehead has hit the nail on the head

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