Former bankrupt Tim Darch is feeling guilty.
As he types away at the message boards of various finance websites, adopting multiple names as he advises hundreds of people on their debt problems, he can’t help but feel awkward.
He never finished paying for his laptop. In fact he didn’t pay a penny for the £2,500 leather sofa he sits on either.
“I do feel guilty that my creditors have not got back anything from me,” he says. “Companies have lost money and I would still like to take responsibility and pay it back.”
Mr Darch first got into financial difficulties after his income was cut two and a half years ago. After unsuccessfully trying to negotiate with his debtors and talking to the Consumer Credit Counselling Service, with £56,750 of debt he decided that bankruptcy was his best option.
“I thought do I want a long term fight through this, or get it over with, fairly fast, fairly furious? So listening at what they had to say, looking at my circumstances and my future circumstances I then decided bankruptcy would be the better route."
It's an option that increasing numbers are opting for. Tina Morris of Christians Against Poverty says that they advise some of their clients to choose bankruptcy.
“We want people to have the hope of a debt free future really."
"If people aren’t going to be out of debt in five years we will look at insolvency options. It can be a fresh start.”
Now discharged Mr Darch is seriously concerned about the increasing levels of debt and bankruptcy in Britain. Despite his own experiences he believes that bankruptcy has become too easy since the introduction of the Enterprise Act in 2002. Aimed at helping businesses and entrepreneurs to recover quickly from financial failures it reduced the automatic restrictions on undischarged bankrupts and introduced automatic discharge after a maximum of 12 months.
“When I was younger if anyone had suggested bankruptcy I would have been scared stiff. It was draconian, it was hard. But since the Enterprise Act has come in, it has come round to people that bankruptcy is now an easy thing. Individuals including myself have capitalised on that.”
However, despite this common belief that the change in the rules has encouraged individuals to choose bankruptcy, a recent study by the Centre for Insolvency Law and Policy at Kingston University shows that knowledge of the Enterprise Act is actually very low. To most surveyed the perception of it as stigmatising and negative remains.
Getting to the root of the problem
If people still fear the stigma and restrictions of bankruptcy, there must be other reasons for its increasing popularity. For many, the easy availability of credit is a factor in their descent into debt. Credit cards, store cards and loans have all been variously blamed for helping people to over extend themselves financially. It’s a hot topic amongst the personal finance communities online. I asked the posters on Money Saving Expert.com whether they think credit is too easy to get.
“It's far too easy. Even getting a store card is the easiest thing in the world. Realising that you can get what you want now without seeing the actual funds in your bank account decreasing is an extremely exhilarating feeling.”
“I think it’s definitely too easy to get credit.
"I think the culture of only paying for things that you actually have the money for is all but dead.”
However, it is easy to blame others for your problems and some feel that people need to take greater personal responsibility.
“Nobody makes you apply for that credit card or that loan, or spend that money on crap you don’t need,” one message argues.
Going for broke: Why is bankruptcy on the increase?
