The perception that bankruptcy leads to social stigma still puts many people off the option as a way of finding a debt solution, according to one expert.
Nick O’Reilly, vice president of the Association of Business Recovery Professionals (R3), suggests that the fear of social condemnation often deters indebted Britons from entering bankruptcy, even when it offers them their most effective way to clear debt.
“With bankruptcy it’s a one year period, your surplus income may be caught for a three year period at maximum, and you’re released from your obligations at the end of that period and that’s that,” said Mr O’Reilly.
“People faced with that against the alternative of a five year payment plan under a voluntary arrangement chose the five years because they don’t want the stigma! I don’t understand why that is.”
Mr O’Reilly’s comments come after research by the Consumer Credit Counselling Service found that 58 per cent of its clients would choose not to pursue bankruptcy even if they knew it was their best option financially.
Meanwhile, figures compiled by R3 suggest that young consumers carry the bulk of the burden of unsecured personal debt in the UK.