Insolvency specialists R3 had submitted a number of innovative new proposals in relation to Bankruptcy that could see the current Bankruptcy period extended from one year to three.
R3 has long advocated changes within insolvency procedures and have submitted a number of proposed changes that are intended to improve the quality of debt solutions available to those in financial difficulty.
Some of the reforms include spreading out the compulsory £700 Bankruptcy fee over a number of months rather than in a single payment, increasing the availability of Debt Relief Orders and expanding the Bankruptcy period from one year
to three years.
Currently, Bankruptcy consists of a one year repossession period in which all of the users most expensive assets such as their house and car are seized and auctioned off in order to clear as much of their debt as possible. After the year is up, the individual then enjoys the rest of their debt being written off, though they might be asked to make small contributions from their wage if their financial position significantly improves in the following two years.
R3 president Liz Bingham has highlighted that despite the recent growth forecasts in the UK, that debt levels remained high and that more people would likely utilise Bankruptcy as their preferred debt solution in the upcoming year.
Mrs Bingham said:: ìThe official number of personal insolvencies has fallen over the past few years, but it is not clear how long this downward trend will last. Household debts have returned to their pre-financial crisis levels; five years after recession, wage growth still dawdles behind inflation; and an interest rate hike is now likely to be coming sooner rather than later.
ìAgainst this backdrop, an increase in the number of people who become insolvent unfortunately seems inevitable in the near future.î
A study conducted by Think Tank Social Centre for Justice last month estimated the countryís total personal debt levels to have reached a monumental £158 billion, clearing indicating the strain that a multitude of houses are feeling under current financial conditions in the UK.
And the result has been that the number of reported insolvencies within England Wales rose by 1.2% in the third quarter of last year to a total 26,030, whilst a sizeable 2.4 million people are thought to currently be using a debt management plan.
Individual insolvencies in England and Wales during the third quarter of 2013 totalled 26,030, up 1.2% on the second quarter of 2013, but down 7.3% on the same period last year, according to official statistics released in October 2013 by The Insolvency Service.
Stuart Frith, chairman of R3ís personal insolvency committee, said: ìPersonal insolvencies and consumer debt have recently increased, while an interest rate rise looms on the horizon.
ìAction is needed now by the government to make sure the personal insolvency regime can deal with any sustained rise in the numbers of people with severe debt issues.
ìA good personal insolvency regime must strike the right balance between helping financially struggling people get back on their feet, and protecting creditors like banks and businesses from people running up debts without being worried about the consequences.î
ìWhilst on the one hand wealthy Europeans are heading to England and Wales to take advantage of the bankruptcy regime and its very short bankruptcy term ñ so-called ëbankruptcy tourismí ñ on the other hand, financially struggling people unable to afford the fee to enter bankruptcy and have too many debts and assets to enter a DRO.î
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