Bankruptcy rules could be blamed for making the effects of the credit crunch even worse.
Made under the Insolvency Act 1986, bankruptcy is an order against an individual debtor (not a limited company) which signifies that he/she is unable to pay his/her debts. As a result of bankruptcy, bankrupts cannot trade or act as a company director.
Bankruptcy is often seen as an easy way for consumers who had failed to get a second chance. Have the reforms to the bankruptcy rules led to abuse?
Reforms to the Bankruptcy rules took place in 2004 which allowed bankrupts to be discharged after 1 year instead of 3. This has possibly led to a belief that money can be borrowed, regardless of whether it can actually be repaid due to the more relaxed attitude. This has led to lenders being left wide open to losses.
Bankruptcy laws should be made more stringent to stop such a lax attitude to what is a serious issue.