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Aggressive lenders `can lead to bankruptcy declarations`

04/04/2007

Lenders who ask for too much from borrowers could cause them to declare themselves bankrupt, a licensed insolvency practitioner has claimed.

Philip A Beck was responding to a recent report by the Registry Trust which indicated that county court judgments for unpaid debts have risen by 33 per cent since 2005.

He explained that although "lenders are entitled to their money back" and may choose whether to accept or deny an individual voluntary arrangement (IVA), asking for too much money could mean that a debtor decides to opt for bankruptcy.

"Most lenders put a threshold of 25 p on the pound below which they wouldn`t even consider a proposal and the reason they do this is to maintain standards because they do not want to be inundated with IVA proposals," said Mr Beck.

"Having said that … there are a large number of people who put forward IVA proposals when really they haven`t got much to lose if they went bankrupt."

A total of 17,063 personal bankruptcies were declared in the last three months of 2006, according to the Insolvency Service.

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