Despite the recovery, bankruptcies are expected to remain at these high levels to the end of the century and beyond, caused mainly by the increasing numbers of people who start businesses because of the lack of "real" jobs.
Bankruptcy laws in the UK are harsh. Other than being left with the tools of their trade and basic household possessions, bankrupts are stripped of all their property. Their homes, even if jointly owned, can be sold to realise the bankrupt's share of the value of any equity in it.
A bankrupt is held in bankruptcy for at least two years, usually three. During this time anything earned above a strictly-defined limit must be paid to the trustee in bankruptcy.
During the period of bankruptcy, any inheritances or other windfalls would also go to the trustee. Some kinds of pensions can be attacked and life policies of the bankrupt will be cashed in. Cars worth more than pounds 500 will be seized.
In addition, a bankrupt will find it impossible in most cases to obtain a bank account, although it is possible to open savings accounts in building societies. Credit is hard to obtain for a bankrupt or his family for eight years. A bankrupt is not allowed to obtain credit of more than pounds 250 from any individual creditor while bankrupt, unless the creditor agrees.
The humiliating aspect of bankruptcy means many people go to extreme lengths to avoid it, sometimes causing themselves more damage in the process. There are many rogue debt advisers around who counsel people into expensive and painful "voluntary arrangement" procedures which, more often than not, fail, with bankruptcy ensuing.
In many ways, the complex financial needs of people in the 1990s mean that bankruptcy is probably a bigger nightmare now than it would have been 100 years ago. This is because in the last century few people owned their homes or required banking facilities and other modern financial services and products. Bankruptcy law remains primitive.
Most people who go bankrupt are middle-aged business people, often with families. They face emotional trauma as well as the loss of the result of a life-time's work. They then often find themselves deserted, even by family and friends.
I founded the Bankruptcy Association in 1983. We have grown since then and we now have nearly 3,000 members. We provide a friendly face to turn to for people either facing the prospect of bankruptcy, or going through it.
We provide a national telephone helpline service, as well as seeing people face-to-face when necessary. Members also receive a quarterly newsletter. We campaign for changes in the law and act as a watchdog over the Insolvency Service and other insolvency practitioners, although 95 per cent of our time is spent offering advice and help. We are primarily concerned with offering practical helpn
John McQueen is founder and chief executive of The Bankruptcy Association of Great Britain and Ireland.
The Bankruptcy Association's inquiry line numbers are 01482 658701 and 01524 64305. Membership of the association is open to anyone and cost pounds 15 per annum. Further details from: The Bankruptcy Association, FREEPOST, 4 Johnson Close, Abraham Heights, Lancaster, LA1 IBR.
`Bankruptcy Explained', by John McQueen covers the effects of bankruptcy laws in all parts of the UK. The book is available from the above address for pounds 7.95 (P&P included).