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Scotland's poorest to be hit hardest by potential bankruptcy changes, groups warn 15 May 2012

Scotland’s most “vulnerable” would be hit hardest by potential changes to personal bankruptcy law, two groups have warned.

R3 and the Institute of Chartered Accountants Scotland (ICAS) have both voiced fears debtors could be trapped in long-term agreements “crippling them financially for years”.

The Accountant in Bankruptcy (AiB) – which is responsible for administering the process of personal bankruptcy – has launched a consultation on potential reform.

The proposals have suggested setting a minimum dividend payment of 50p in the pound for Protected Trust Deeds (PTDs) and basing repayment contributions on a fixed percentage of an individual’s income.

However, the bodies cautioned that “debtors may face decades of poverty” and be restricted to a “life of limited credit and large repayments”.

John Hall, Scottish R3 council member, explained: “Given that many Scots are simply surviving at the moment by only paying the interest on their debts and that tens of thousands are being made bankrupt each year, it is questionable whether now is the right time to make the conditions even tougher for some of the most vulnerable people in society.”

Meanwhile, Bryan Jackson chair of the ICAS Insolvency Committee, said the potential changes would not benefit anybody.

He added: “It is unlikely that creditors will see an improved return.

“Debtors will be tied to debts for many more years than at present, unable to experience financial stability for almost a decade.

“Society will not benefit from losing hundreds of thousands of consumers who otherwise might be able to spend money improving the economy.”

The consultation will end on May 18.

 

 

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