Debt burdens aren’t helped by an extended bankruptcy
The Bankruptcy and Debt Advice Bill completed Stage 1 on the 18th of December 2013 and is aimed at to amend the Bankruptcy (Scotland) Act of 1985.
The Bankruptcy and Debt Advice Bill
The Bankruptcy and Debt Advice Bill completed Stage 1 on the 18th of December 2013 and is aimed at to amend the Bankruptcy (Scotland) Act of 1985. In somewhat more elaborate terms, the bill “seeks to ‘ensure that appropriate, proportionate, debt management and debt relief mechanisms are available’ and contains provisions to support the Accountant in Bankruptcy in improving its service”.
At a first glance, this is all in all an innocent bill that has its good sides. Specific sources however have stated that the bill also concerns more specific clauses that might have a negative outcome. One specific clause of the bill, number four, has been said to make the life of the average Scot that is struggling with financial difficulties even harder.
What currently is the case is that (personal) bankruptcy, or sequestration, in general takes around one year. Debtor contributions out of income however can be paid up to three. Currently, the bill proposes that this period, in which debtor contributions out of income can be paid, is extended to minimally four years - which is, according to the government, claimed to balance the needs of those in debt as well as creditors.
Debt in general however is different in practice in comparison to debt in theory. The longer a person in debt has to pay back creditors out of their income, the more difficulties will emerge. This is especially the case in the current economic environment, in which the income of people is under pressure - and costs are at the rise.
There are several institutions that have objected to the bill that is proposed (and which will probably see light of birth in 2014). Advice agencies for example - such as StepChange Debt Charity Scotland, Money Advice Scotland, the Scottish TUC, Trust Deed UK and the Govan Law Centre all indicated that the potential consequences that the bill envisions could be very severe. Even banking groups such as Lloyds Banking Group have indicated opposition against the bill, while they are one of the potential creditors that the bill aims to protect and help. The bank was quoted to say that “bankruptcy is about giving a clean start, and not prolonging the distress that comes with being in debt”.
The parties that are opposing the bill have had their input given to the lawmakers during the consultation on the original draft bill. The initial draft indicated that there would be five different ways of product to pay back debt; the one that indicated that people are “assessed as able to contribute” made it to the final version of the bill. Many respondents however tended to state that a product like this is not necessary. Almost half of the respondents indicated that a repayment period of 3 years suffices. Fergus Ewing, Enterprise minister, indicated subsequently that the period of 4 years was chosen as a compromise (since half of the respondents also indicated a payment period of 5 years is most optimal). When looking at the practical side of debt however, this is a flimsy attempt at compromising, especially if it makes for such a decision with such impact.
If the bill passes in its current form, Scots all across the country that have filed for sequestration as a last resort will be confined to bankruptcy for a lot longer, making the stress that comes with it a whole lot worse to bear.
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