As Britain officially slipped into debt to the tune of £1 trillion - that's £1,000bn - this week, the accountancy giant PricewaterhouseCoopers called for drastic reform of the bankruptcy laws.
Patrick Boyden, a partner at PricewaterhouseCoopers and one of the UK's most experienced practitioners in the field of personal insolvency, said: "There is considerable pressure building up in the system which could spill over, especially given the looming weight of falling house prices and further interest rate rises."
He wants to see a new no-frills "Consumer Arrangement" which would make it easier for people overwhelmed by debt to recover, while ensuring creditors have as much protection as possible. This would kick in when someone owes up to £30,000, and would guarantee a minimum return of 20p in the pound to creditors over a reasonable period, paying regular dividends by electronic transfer wherever possible. Mr Boyden said: "This would simplify the process of negotiation with creditors, eliminate meetings, and streamline voting and court appeals. Insolvency practitioners' fees would be based on the results they achieve and on the monies returned to creditors. Consumer Arrangements would minimise the damage to the economy, to businesses and to people's lives."
Individuals who are subject to an Arrangement would immediately be declared bankrupt if they fail to make a creditor payment, or if they are found to have omitted debts or assets.
This would complement and strengthen existing individual voluntary arrangements (IVAs). Since their introduction in 1986, IVAs have been less popular than other options open to individuals in financial difficulty, including bankruptcy. According to PricewaterhouseCoopers, this is because IVAs are too complicated, requiring lengthy negotiation between different parties.Reuse content