Press Releases
08 April 2009
New ‘quick and easy’ online bankruptcy service will make banks more reluctant to lend to borrowers on low incomes
• From April 6th 2009
• Debtors can escape debts up to £15,000
A new online service which will allow borrows to write off debts of up to £15,000 quickly and easily will make banks even more reluctant to lend to borrowers on low incomes, warns Wilkins Kennedy, the Top 25 accountants.
The new Debt Relief Orders (DROs), which debtors will be able to apply for online, will be introduced from April 6th 2009. Once a DRO is granted, creditors will be unable to bring legal action against debtors for repayment of loans, and after 12 months all debts will be written off.
Wilkins Kennedy says that with rising unemployment boosting the number of people with low income and few assets, DROs could become a very popular way for debtors to walk away from creditors without making any attempt to pay them back.
In order to be eligible for a DRO, borrowers need the approval of an intermediary, such as the Citizens Advice Bureau. Debtors are supposed to demonstrate that they have less than £300 in assets and less than £50 a month disposable income after normal household expenses, but Wilkins Kennedy says that intermediaries will have limited powers and resources to check applications.
Anthony Cork, Director, Wilkins Kennedy, comments: “This is quick and easy bankruptcy at the click of a mouse. Huge numbers of borrowers will be able to walk away from debts with very little pain for themselves and without the deterrent effect of a genuine bankruptcy. The growing number of people unemployed with few obvious assets is likely to make this service very popular.”
“It means banks are going to be more reluctant to lend to those with few assets or poor employment histories. This could force more and more sub-prime borrowers into the arms of loan sharks.”
He adds: “With excessive borrowing blamed for the credit crunch the Government is sending out totally the wrong message by allowing borrowers to wipe out debts without coming to an arrangement with their creditors.”
Wilkins Kennedy says that the very limited resources and powers intermediaries will have to check applications for DROs will make the service highly susceptible to fraud. Trustees of normal bankruptcy orders have much stronger statutory powers to investigate individuals.
Anthony Cork says: “Other than asking to see bank statements, what can intermediaries do to check applicants’ claims that they have less than £300 in assets? Intermediaries won’t have powers to gain entry to debtors’ homes to check for laptops and plasma screen TVs. Debtors could have property abroad or even assets in other people’s names, but it will be very difficult for intermediaries to conduct thorough checks.”
ENDS
Press enquiries:
Anthony Cork
Director
Wilkins Kennedy
Tel: 020 7234 3450
Mobile: 07880 601962
Paul Arvanitopoulos or Nick Mattison
Mattison Public Relations
Tel: 020 7645 3636
