According to recent statistics, the increase in the number of people declaring themselves insolvent in England and Wales saw an 18.5 per cent increase. The rate was particularly high in Scotland and Northern Ireland – rising by 75 and 39 per cent respectively in the final quarter of 2008.

For most of the last century and the one before it, bankruptcy was synonymous with ruin. It became a word associated with failure and was only voluntarily entered into as an absolute last resort. The vast majority of bankruptcies were forced by creditors.

In the US, the situation was somewhat different. Bankruptcy was accepted as a part of taking risks and though not exactly seen as a good thing, there was far less stigma attached. To an extent this is happening in the UK and it is possible now to read and hear the idea that voluntary bankruptcy may be a viable personal and business strategy.
When the government passed the Enterprise Act in 2002, it was hailed as an attempt to make bankruptcy less onerous. The usual term for bankruptcy discharge was previously 2-3 years. From 1 April 2004, however, most bankruptcies were discharged within 12 months.

The purpose for the changes was to give those who had been unavoidably made bankrupt for genuine reasons, a better chance to start again.

This gave a strong signal that bankruptcy had lost a lot of its former stigma.

This, however, can be a mistaken belief. Going bankrupt voluntarily can be a viable option and can have real benefits, but it must be considered extremely carefully.

False impression

An important point to note and understand about bankruptcy is there are two aspects to it. First, there are the strictly legal conditions and secondly, there are the social consequences; both are important and both must be considered in any decision regarding effective debt management.

There are a number of professions where bankruptcy can still mean dismissal. Bankrupts must leave and cannot join: the army, security services, police, local government and the national government. Bankrupts cannot be company directors and if they have a business, they must inform all suppliers they have entered bankruptcy.

These restrictions are fairly widely understood, but bankruptcy goes further than this. Bankrupts, and former bankrupts, can also find it extremely difficult to get any position which involves being near to or handling money. This can mean building societies and credit unions. It also includes manning checkouts at shops, insurance companies, any cashier
position or role in a finance office, betting shops, auctioneers estate agents etc.

These restrictions are much wider than they may first appear. For example, the ban on handling finance can even include working voluntarily for a charity.