Insolvency specialists today called for better protection for creditors and debtors amid fears an interest rate rise could wreak havoc.
Insolvency trade body R3 Midlands called for urgent reform in a new report entitled The Personal Insolvency Landscape, published locally by the regional branch.
R3 Midlands chairman Richard Philpott, a partner at KPMG in Birmingham, said the research highlighted the vast number of individuals unable to access the most appropriate debt solution as well as the lack of creditor protection from reckless spending.
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The survey also indicates the need for the personal insolvency regime to be ‘future-proofed’ against a possible rise in insolvencies once interest rates start to increase.
Richard Philpott said: “With recent increases in personal insolvency and consumer debt levels, an eventual and inevitable rise in interest rates could prove significantly detrimental to our local economy.
“Action is needed now by the Government to ensure that the personal insolvency regime can deal with any sustained rise in individuals with severe debt issues.
“A sound personal insolvency regime must strike the right balance between helping financially struggling people get back on their feet, and protecting creditors from people running up debts without concern for the consequences.
“The current regime has the right building blocks to achieve this balance, but more work can be done. Too many people are currently unable to access a personal insolvency solution that is right for them.
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“Parts of our personal insolvency regime are both too lenient and too inflexible.
“On the one hand, people from other European countries are heading to England and Wales to take advantage of the bankruptcy regime and its very short bankruptcy term – so-called ‘bankruptcy tourism’ – on the other hand, financially struggling people are unable to afford the fee to enter bankruptcy and have too many debts and assets to enter a Debt Relief Order.
“These people are left without protection from their creditors.”