A new think-tank report has found that over 300,000 people in Britain cannot afford to enter bankruptcy.
Ahead of tomorrow’s (29 July) official insolvency statistics for Q2 2014, the Centre for Social Justice (CSJ) has said an estimated 315,000 people cannot afford the £525 fee involved with entering bankruptcy.
Both the expense of entering bankruptcy and an uncompetitive banking market are fuelling “problem debt”, the CSJ has said.
CSJ Director Christian Guy said: “There is a growing group of people under intense pressure as a result of problem debt. This debt rips into families and traps people on the edges of our society. Many don’t know where to turn.
“Worse, people in poorer communities are effectively excluded from mainstream banking – hit hard by punitive fees, penalties and crippling debt.”
A report from insolvency trade body R3 in late January included proposals to amend the three primary personal insolvency processes in order to add “balance and cohesion”, offering debtors “better access to debt relief” and “better protection from those recklessly accumulating debt” for creditors.
The report claimed the rate of personal insolvency in England and Wales had grown 300% between 2003 and 2013, with 102,000 people entering a formal insolvency between September 2012 and September 2013.
The CSJ has also criticised the recent cap on payday loans, claiming it could drive people in debt to using the services of loan sharks instead.
It also recommends creating a network of community banks which are able to offer smaller loans, similarly to payday lenders, but with much lower interest rates, as well as relaxing rules around credit regulations.
Guy said: “The time for quick political fixes is over. A new government should focus on preventing problem debt, creating a savings culture and a new market of community banks.
“It should also ensure more help and advice reaches people already struggling with toxic debt.”