Kate Hughes: Best not to be sniffy about bankruptcy

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The Independent Online

If money really is the last taboo, then just talking about personal bankruptcy will surely see you struck down by lightning. And assuming nobody ever has debt problems we can maintain our pleasant water cooler chat undisturbed.

But as the economic tide begins to drop away the financially stranded will start to appear above the waterline. To put it bluntly we need to decide, quickly, whether we judge those individuals as undisciplined and lazy or victims. Government figures show a record total of 53,114 people petitioned to go bankrupt in 2007, a 44 per cent leap in just two years.

And yet we still regard those who have to file for bankruptcy as social lepers, despite the massive hikes in the price of everything from food to energy, the soaring divorce rate and the frequent reports of financial scams, profiteering and outright theft. Many who are teetering on the brink of bankruptcy can't even bring themselves to tell their families, only admitting the truth when the bank comes to board up their house.

Tragically, the fear of social stigma may be so great, particularly for older generations, that they could be prepared to make themselves physically ill, or worse, before accepting that this may be their only option. I cannot believe that the British stiff upper lip should extend to that.

And let's be clear on the myth that bankruptcy is the easy way out. If you chose this route you will no longer be in control of your assets and may lose your home. In fact, you may only be able to keep household possessions like bedding, clothing and furniture, or things you need for work.

Everything else will be sold off. The details of your bankruptcy will be published in The London Gazette and your local paper. The bankruptcy notice will remain on your credit file for six years, making any kind of financial dealings a nightmare.

If that is not enough, we have now decided to punish them further – ironically by upping the cost of applying for bankruptcy to around £495. Yes, this fee may put a few off giving up too easily, or make students hesitate before writing off their university debts. And yes, there is the tiny possibility that you can get a reduction on those fees if you are a step away from living in a cardboard box. But £495 is a huge amount for many whose financial situation has become impossible for any number of reasons, and many charities warn that this can take years to save for. Meanwhile, creditors will keep calling, red letters will continue to fall on the mat, and the debts will continue to spiral.

The honourable thing may be to soldier on but sometimes that is simply not possible. Surely the fallout of going bankrupt is enough that we don't have to kick debtors when they are down by demanding they pay a fortune they can't afford to officially admit they can't cope.

Don't get me wrong, I'm as much a survival-of-the-fittest kind of woman as the next, but with the threat of recession hanging over us, maybe we should give those in severe straits a bit more slack, even if they go on to financially hang themselves with it. We may seek to distance ourselves from those we fear may bring us down, but it could be a very costly mistake to assume that any of us are immune.

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