In the collections industry, there’s always a balance to be struck between enabling creditors to receive the money due to them and helping debtors to get back on their own two feet.
That’s a point made in an editor’s letter in CCR Magazine that suggests one obstacle to this is the cost to individuals of entering bankruptcy (remembering that companies in trouble go into liquidation, a different process).
It followed news from insolvency trade body R3 that 70% of personal insolvency practitioners had seen debtors unable to enter bankruptcy in the past year because they were unable to afford the debtor’s petition: quoted by CCR as costing £175 in court fees plus a hefty £525 administration fee to the Insolvency Service.
Well, you might say, there are other ways to resolving debt, for example through an individual voluntary arrangement, a debt management plan or a debt relief order. All these routes have been followed by increasing numbers of people in debt, rather than formal bankruptcy with all that implies in handing control of your affairs to a trustee.
True, but the same research found that 59% of those professionals who had seen debtors unable to take the bankruptcy route also said the individuals had not then addressed their debts at all.
Only 6% reported debtors as going on to enter an IVA, 3% a debt management plan and 2% a debt relief order.
The government must be aware of this situation. Its own website giving advice on the process of bankruptcy, and which incidentally says the court fees are now £180, suggests that people who cannot afford the bankruptcy petition should consult the charity Citizens Advice.
Steven Kiely, editor of CCR Magazine, says in his editorial in April’s issue that this confused situation cannot be allowed to continue.
He quotes Stuart Frith, chair pf R3’s personal insolvency committee, as saying that the rules ‘severely limit the chances of financially struggling people resolving their situation’.
He suggests allowing people to pay in instalments, making the legal process accessible while recognizing ‘that a cost should be incurred by someone looking to achieve protection from creditors’.
I’m inclined to agree. At SJ Collections we have long experience in helping to reach mutually acceptable arrangements between debtors and creditors. The cost of a legal process should not be an obstruction to this.