58% of Britons believes bankruptcy should last longer than a year, according to research by R3.
The insolvency trade body’s research found that 82% believe that some people take advantage of the bankruptcy system to write off their debts which they built up through reckless spending.
Meanwhile, 64% feel bankrupts should be treated differently according to their prior spending behaviour and most could avoid bankruptcy by reining in reckless spending (65% agree).
“Our bankruptcy regime, lasting only a year, is quite lenient compared to other countries,” said Lee Manning, R3 president.
“While no-one is advocating a return to the ‘debtor’s prison’, there is a strong feeling that a debtor’s spending behaviour should be factored into the length of the term of bankruptcy. Perhaps fuelled by stories of celebrity debtors, there is support for a move to distinguish the genuine hardship case from the reckless spender.
“Currently, the actual term of bankruptcy cannot be extended for reasons of reckless or blameworthy behaviour prior to bankruptcy. Although a Bankruptcy Restrictions Order (BRO) can be imposed to extend the restrictions of bankruptcy for between two and 15 years for culpable behaviour, a BRO does not increase the bankruptcy term. This means that any assets acquired by a reckless spender after their 12 month term of bankruptcy, even where they are subject to a BRO, can be retained by that individual rather than helping towards paying back their debts.
“Only by extending the term of bankruptcy, not just the restrictions, can we really hope to deter reckless spending.”