London, UK -- (SBWIRE) -- 01/31/2013 -- During a debate at Insolvency Today’s annual conference, the chief executive of the IS, Stephen Speed, declared that the number of bankruptcy cases where there were no assets had reached a tipping point and taxpayer money will have to foot the bill for the shortfall. The IS was forced to write off £81 million earlier in 2011 due in part to individuals having no assets as well as those having valueless or much lower value assets due to the weak economy.
Stephen said: “The issue is who funds fund-less bankruptcies. We are trying to get the number of cases down and we have got to reduce cases to a level where recovering costs is not an issue.”
Currently, costs for bankruptcies where an individual has assets can run to £700 , while costs associated with the administration and processing of IVAs can run into many thousands. For individuals with no assets and on a low income, Debt management plans costing just £90 can be obtained, a figure far below the actual costs involved in administering the bankruptcy process. The IS wants to look at a variety of different issues tied up within bankruptcy fees, including the fees that IPs (Insolvency Practioners) earn and whether they are standing in the way of both lenders and the IS recovering their costs in each case.
Gary Jones, head of recoveries and litigation at HSBC, said: “In consumer bankruptcies the level of assets is such that we very rarely see a return, so for us to focus on the fees being taken out is where we can see the potential for increasing our returns. If we are seeing cases where fees are sucking up all the dividends that is where we will focus our attention. It is a less interesting side for us because of the low returns, but that does not mean transparency around fees is not important to us.”
A spokesperson for IVA Insolvency Company, IVAonline.co.uk, is worried about the likelihood of bankruptcy costs increasing for debtor. “If the IS hasn’t looked at the costs that debtors have to pay yet, it won’t be long before they do. The desire to reduce the caseload of asset-less insolvency cases is noble, but in the current climate not likely.
The unemployment rate has just jumped by 114,000 people in the last month, so it is more likely the IS will see an increase in the proportion of asset-less bankruptcies, not less. I hope that the IS decide to leave the debtors bankruptcy costs alone and look instead towards the fees that IPs earn and the costs that creditors recover instead.”
The number of personal insolvencies has risen dramatically in the last year, with women aged 18-35 overtaking men for the first time. The accountancy and advisory firm RSM Tenon believes this is due in part to celebrities like Kerry Katona being seen to walk away from years of recklessly spending money and poor money management. Mark Sands, head of personal insolvency at RSM Tenon, said: “People blame female money troubles on almost everything from a culture of consumption to alleged ‘bankruptcy role models’ such as Kerry Katona. Spending habits and attitudes to debt have changed over the past generation at the same time that women have achieved ever greater levels of financial independence.
As women become more and more independent, lenders see them as a more and more lucrative market. There’s an element of truth that the offer of buying handbags with pricey store cards is sending more and more women bust.”
IVAonline.co.uk provides help and advice for Consumers on the IVA debt solution. One of the UK’s No.1 Debt Company's, Consumers can use an IVA to write off up to 70% of what that cannot afford to repay. Interested parties can use the Free IVA Calculator to see if they qualify now.