Wednesday, 30 June 2010
Tuesday, 29 June 2010
You wouldn’t be alone. As levels of debt in young women remain high, and the number going bankrupt rises (55% of young bankrupts are women), Company has uncovered a number of dangerous new tactics used by loan companies to target vulnerable young women. Websites like http://www.txtloan.co.uk/ are offering new ‘Payday loans’ via text, iPhone apps or advertising links on social-networking sites. The catch? The 2,000% interest APR they’re charging. So if you do borrow what you can’t afford, you could find yourself deeper in debt than ever.
It used to be that loans required a trip to your bank – but now you can borrow up to £1000 by text or at the click of a mouse. But the 2,000% APR means paying back a whooping £1,861 on top, over just six months.
In 2009, the Consumer Credit Counselling Services, a free debt-advice service, recorded an increase in contact from under-25s. There was a 26% rise in calls to its helpline and a 200% increase in those seeking help on its website since 2007. And, although the average male debt has recently fallen, female debt has remained the same. Of those seeking help with debts, the average person under 25 owes £7,524 and single women owe, on average, a staggering £16,937.
Experts have also reported a correlation highlighting that, as women become more successful, their debts grow too. Statistics reveal that, the more we earn the more we’re likely to owe. So someone on a salary of £30,000 or more a year will have a credit-card debt three times larger than someone who earns less than £10,000 a year, and a personal-loan debt twice as high.
Psychologist, Dr Sheila Keegan also believes it’s easier to get into debt now, and puts that down to the internet. “Years ago, people were paid in cash. Now everything is done online or by card. Because your money is not so visible, it doesn’t seem as real. That, alongside the fact that the government encourages young people to take out loans for university, means debt has becomes a permanent part of young women’s lives.”
One of the main problems about debt is that we don’t talk about it. Behaviour expert, Judi James explains, ‘We’ll chew over heartbreak and talk about our sex lives, but money is still taboo.”
James Birtles also believes that encouraging women to speak out is key to helping solve the female debt crisis. “Most women struggle with debt on their own, but, if you’re open with friends, you’ll probably find 80% are in debt and don’t really like it. You can become debt buddies and help each other out of the red, in the same way dieting or exercise buddies can help you lose weight.”
Company approached The Financial Standards Authority (that will be split into two separate bodies in 2012) with our concerns about payday and Friday-night loans. It told us it is looking into loan companies charging terrifying amounts of interest and, as we went to press, it is preparing to publish a report on the subject.
In the meantime, Jasmine’s advice is to never act on impulse when money is involved. “If you need a loan, take your time, do your research and always read the fine print. Generally, if it sounds too good to be true, it probably is.”
Monday, 28 June 2010
"Lord Great Chamberlain's Correspondence Re Bankrupt Peers" - another set of interesting documents for the Muir Hunter Museum of Bankruptcy
The Lord Great Chamberlain has jurisdiction, entrusted by the Sovereign, for areas of the Palace of Westminster which are not administered by the House of Lords and House of Commons. These are primarily the Royal Robing Room and the Royal Gallery. He has joint control with the Speakers of the two Houses, for Westminster Hall and the Crypt Chapel.
The title is hereditary. After constant disputes, the House of Lords decided in 1902 that the office was jointly vested in the families of the Marquessate of Cholmondeley, the Earldom of Ancaster and the Marquessate of Lincolnshire. King Edward VII agreed that the post should be held in turn for the duration of a reign. The office is currently held by the 7th Marquess of Cholmondeley."
The letter cited above was sent during the tenure of the following three officeholders:
- Gilbert Heathcote-Drummond-Willoughby, 2nd Earl of Ancaster
- Charles Robert Wynn-Carrington, 1st Marquess of Lincolnshire
- George Cholmondeley, 5th Marquess of Cholmondeley
Thursday, 24 June 2010
...creditors such as banks, who in effect appoint IPs, have a strong incentive to control fees and direct the activities of IPs in the 63 per cent of cases where there are insufficient funds for secured creditors to recover all their debts.
The OFT found evidence that IPs charge around nine per cent more, like-for-like, when it is the unsecured creditor who pays, rather than the secured creditor.
The OFT's assessment of the market suggests there may be further problems such as overly long liquidation proceedings and insufficient oversight of the use of pre-packaged administrations...."
- reform of the regulatory system by repositioning the Insolvency Service (IS) as the dedicated oversight regulator of the Recognised Professional Bodies (RPBs) and withdrawing its role as a direct regulator of IPs [but no recommendation to reduce the number of RPBs]
- providing objectives for the regulatory regime against which its performance can be measured
There is no doubt that the OFT carry great weight as a powerful arm of Government that can, for example, punish with a form of one off tax if they find miscreant behaviour. Their views are taken up by the press and influence policy makers and the public alike. I am sure the coming days will bare this out with articles on the supposed "harm" that the current system perpetuates (see the Telegraph's critique here and see the more balanced BBC report here). This OFT influence makes it all the more alarming that some of the issues mentioned above can be cited as alleged flaws in the research. How well does this critique serve public interest if the effect is to cause a reverse Delaware effect on the insolvency industry? The OFT mentioned today that directors do not trust IPs. This report will only serve to bolster the air of mistrust and suspicion. I wonder how the report will go down in Bloomsbury Street?
"Among the creditors was SpreadEx, an online betting firm. The company's barrister, Tim Gosling, said there had been no contact from Mr Hendry since the application for an IVO (sic).
No figures were given by the court as to what Mr Hendry is said to owe and no court documents were made available.
But it has been reported that former Scotland skipper Hendry faces a tax bill of more than £1m and owes thousands of pounds to other creditors.
District Judge Michael Buckley granted the bankruptcy order.
Hendry was capped more than 50 times for Scotland and played for Rangers, Blackburn Rovers, Manchester City, Bolton Wanderers. He also managed several lower league clubs..."
Wednesday, 23 June 2010
- Chapter 1 - General information
- Chapter 2 - Corporate [sic] voluntary arrangements (CVA) including CVA moratoria
- Chapter 3 - 'In administration' and 'administration orders' - Cases beginning on or after 15 September 2003: In administration
- Chapter 4 - Receivers
- Chapter 5 - Voluntary liquidation
- Chapter 6 - Compulsory liquidation
- Chapter 7 - European cross-border insolvency proceedings
- Chapter 8 - Frequently asked questions
- Chapter 9 - Quality of documents
- Chapter 10 - Further information"
"People struggling with debt who want to benefit from the debt relief arrangements offered by the insolvency regime must be prepared to declare all of their assets or face the penalty imposed on them. It is for the Official Receiver to decide which assets should be sold for the benefit of the creditors and which may be retained by the debtor,” said Les Cramp, Senior Official Receiver for The Insolvency Service.
The warning comes after the number of investigations into potential bankrupts who have tried to hide their assets from the Official Receiver has already risen to more than 200 this year, compared with just 28 in 2008-09.
Bankrupts must disclose all assets, no matter how small, or they face a penalty which could include a custodial sentence, financial sanctions or having their period of bankruptcy restrictions increased by up to 15 years instead of the usual 12 months.
In March this year a £50,000 confiscation order was made when an investigation by the Official Receiver found a young woman had hidden properties In July 2009, following an investigation into her finances, the bankrupt admitted she had failed to disclose that she owned two properties in Surrey and that she had obtained credit to the extent of £17,000 while bankrupt. Following the investigation criminal proceedings were brought against her which ended in court in March 2010 with a £50,000 confiscation order being made. Concluding the case the Judge agreed the bankrupt had abused the insolvency regime that was in place to assist her."
Tuesday, 22 June 2010
"I went into voluntary bankruptcy 15 years ago. The trouble with being an actor is that we're still spending money when we're not earning. I didn't know how to stop taking friends to restaurants and drinking champagne and just carried on spending assuming that more work would come.
When it didn't come fast enough, I built up quite a large debt I couldn't afford to repay and I was advised to draw a line under it. I can honestly say that going bankrupt was the best thing that ever happened to me."
Monday, 21 June 2010
“Since the mid 1960s, we have experienced the rapid growth of the credit card business in its various forms which has greatly expanded the range of credit available. The individual is faced today with easy access to credit, which, if unwisely used, may lead to his insolvency, with little overall control apart from his own innate sense of honesty and prudence and the protection afforded by such measures as the Consumer Credit Act 1974.” (Cork Report, para. 15)
“The problem of distressed personal debts stem from a rapid increase in unsecured bank and credit card lending, which was already attracting warnings from the FSA during the late 1990s.” (Insolvency Practices Council: Tenth Annual Report, 2000-2009, pg 5).
“The increased opportunities for contracting debt have led to the emergence of the consumer debtor, a commonplace today, but virtually unknown in the Nineteenth Century. A wage-earner, with little or no capital assets of any value, can today incur credit to an extent undreamed of a hundred years ago.” (Cork Report, para. 16)
1 - Malaysia
2 - South Africa
3 - United Kingdom
4 - Australia
5 - Bulgaria
6 - Hong Kong, China
8- New Zealand
Ranking on the ease of doing business:
2 - New Zealand
3 - Hong Kong, China
4 - United States
5 - United Kingdom
6 - Denmark
7 - Northern Ireland
8 - Canda
“[T]he regulatory environment for businesses can influence how well firms cope with the crisis and are able to seize opportunities when recovery begins. Where business regulation is transparent and efficient, it is easier for firms to reorient themselves and for new firms to start up. Efficient court and bankruptcy procedures help ensure that assets can be reallocated quickly. And strong property rights and investor protections can help establish the basis for trust when investors start investing again.” (Doing Business 2010, Report Overview, pg 1).
Picture credit: World Bank/IFC, http://psdblog.worldbank.org/psdblog/2009/09/doing-business-2010-reforming-through-difficult-times-1.html
Friday, 18 June 2010
Bankruptcies and compulsory liquidations are running at record levels. Not all that surprising when you think of the severity of the present recession. Numbers are growing so fast though that the Department of Trade may even have to take on extra staff to cope, and they have already got over twelve hundred people working in this particular department. At the present moment you can be put into bankruptcy for as little as two hundred pounds, and that figure has been unchanged since 1976, despite all the inflation that we’ve been suffering since then.
Well, Sir Kenneth Cork, the country’s leading liquidator has been looking at the whole subject for the Department of Trade, and the first half of his report has gone in. The rest is due next month.
Sir Kenneth Cork:
Well, you must remember that it’s one creditor two hundred pounds, and to him it may mean a lot of money, so I don’t think it is, but I think the system wants changing so we keep the little people out of bankruptcy, unless they have made a habit of it.
What sort of changes are you thinking of?
Sir Kenneth Cork:
Well, we’re thinking of having a thing called a debt arrangement order, whereby simple cases, a consumer debtor and all these small people, can declare themselves insolvent, and not to be dealt with by the Official Receiver, but dealt with by a Court Official, who just arranges his debts, arranges for him to pay something out of his future earnings and gives him freedom, very quickly, without the whole panoply of bankruptcy and private examination, for a simple little fellow who has got in a muddle. We reckon it would cut out about eighty percent of bankruptcies.
But if you make it easier, doesn’t it make it easier for him to evade his responsibilities?
Sir Kenneth Cork:
No, because if when he goes for this, he’s a persistent offender or his case shows that it’s really very much bigger than that, then he’ll be referred through the normal bankruptcy procedures, and we’re going to make the bankruptcy procedures very much stiffer.
So we are going to be tough with the people who are really a menace to the community, and simple for the poor little chap or lady, I suppose I should say too, who gets herself into a muddle.
How do you protect the public though, against people who exploit the present laws on insolvency or bankruptcy?
Sir Kenneth Cork:
Well, it isn’t the bankruptcy side that generally the public is being exploited in, it is company liquidation
And one of the things we are going to recommend is that every director, who was twice the director of an insolvent company, should lose his licence, and he will have to go to the courts before he can direct another company.
If the Government chooses to ignore all your recommendations, what do you see as the main dangers in the present system if it continues?
Sir Kenneth Cork:
One of the main dangers at the moment is that where there is a company that somebody like a bank doesn’t have a debenture on it which gives them the right to appoint a receiver and manager, in which case the receiver and manager can carry on the business.
If there is no such change then it has to go into liquidation and it is very difficult to continue the business, and sell it as a going concern, keeping the country’s asset and the employment. That is why we are putting, for the first time, into the insolvency requirements, that the interests of the employees should also be taken into consideration by the liquidator, because after all they have invested not money but their life experiences, and when the business has gone that life experience is wasted for them and the community.
Thursday, 17 June 2010
Grounds for the Presentation of a Petition: Juxtaposing the Views of the Muir sub-committee and Mrs Justice Proudman
Some thirty years earlier, a sub-committee under Muir Hunter was set up to examine, amongst other things, the grounds on which petitions for bankruptcy and winding-up should be founded. The sub-committee suggested that a creditor’s petition should be based solely on the debtor’s inability to pay the debts as they fall due and bankruptcy should be imposed only as a last resort when the Court is satisfied that the imposition is justified in the circumstances. The sub-committee noted that these recommendations may drastically reduce the number of debtors that are made bankrupt by substituting the “mechanistic test” of making the debtor bankrupt simply because he has “ceased to pay debts” with a “clear test” of insolvency. The sub-committee further recommended that the Court ought to exercise jurisdiction to ensure that a debtor capable of being petitioned against is “hopelessly insolvent” in the sense of not having any assets out of which the petitioner’s debt can be paid at the time of becoming insolvent or in future (Re Noble  Ch 129); or has enough realisable assets to pay the petitioner but not other creditors; or has enough realisable assets but refuses to make payment or is a debtor on a “contingent or prospective basis.” These recommendations reflect the provisions contained in section 271(3) of the Insolvency Act 1986, to the effect that the Court may dismiss the petition if it is satisfied that the debtor has “made an offer to secure or compound for a debt in respect of which the petition is presented” and the acceptance of such an offer would require the dismissal of the petition, and the offer was unreasonably refused. This also reflects the statement by Henderson J in Ross and Holmes v. Revenue and Customs Commissioners  2 All ER 126 at 148-9 that “the authorities establish that in such circumstances the discretion to adjourn should only be exercised if there is a reasonable prospect of the petition debt being paid in full within a reasonable period.”
It is difficult to understand why Mrs Justice Proudman declined to exercise discretion to dismiss the petition given that Mr Raguz was neither hopelessly insolvent nor against making payments to the petitioner. He had in his own words “offered adequate security for the debt” and by his own assessment had assets (55% shares of Impney Group Ltd) out of which the petitioner’s debt could be paid. Mrs Justice Proudman examined the application and noted that the appeal jurisdiction involves determining whether District Judge Neil’s decision was wrong on the basis that he did not take into account what he ought to have taken into account and Court of Appeal was not even required to exercise discretion in a different way but to simply take these other things into account (Chadwick J said in Vadher v. Weisgard  BCC 219 at 221). Nonetheless, a closer look at the “new” or other evidence adduced by Mr Raguz revealed that he had initially offered a charge over his Impney shares although Impney went into administrative receivership and the offer of a charge was withdrawn in anticipation. Equally, Mr Raguz had prayed for an adjournment on the grounds that he had offered an assignment of the right of indemnity from Mr Virani (an assignee of the lease) and charges over three pieces of land, although by that time the terms of the charges had changed given that the security was not enforceable until more than six months later. Mr Raguz then withdrew his offer of the right of indemnity against Mr Virani, admitting that the offer had no substantial value. Also, Mr Raguz offered as evidence a terse email from a representative of Keyroll Investments Ltd that stated that this company was interested in purchasing the Impney shares within 4-6 weeks although the email failed to mention the price. Then there was also this “letter” from a certain Mr Rogers representing Pencroft Ltd that offered in a single line to buy the larger plot for the sum of £525, 000.
What this case demonstrates is that it is important to establish tests for determining whether the debtor is “hopelessly insolvent” at the first instance court and whether new evidence meets the requirements for “fresh evidence” on appeal. Relying on the discretion of the judge in each case may fuel inconsistency. Nonetheless, a soothsayer was not needed to predict the decisions in Scottish & Newcastle plc v. Raguz. Judge Neil concluded that the evidence was simply not credible enough and Mrs Justice Proudman failed to see any material change meeting the requirements for the Court to undertake a review under section 375(1) and described Mr Raguz’s efforts at the Court of Appeal as simply “an attempt to have another bite at the same cherry.” (The same bad cherry). Taking Mr Raguz’s contentions at face value, one could reproach Judge Neil and Mrs Justice Proudman for unnecessarily increasing the number of bankrupts by not dismissing the petition against a debtor that was far from being “hopelessly insolvent.” However, a closer examination of the evidence adduced by Mr Raguz shows that the decisions of these judges were not only in keeping with the Insolvency Act but also with the recommendations of the Cork Committee that in some way still represent the spirit of the Act.
Picture Credit: http://images.npg.org.uk/120_120/2/9/mw08129.jpg
Wednesday, 16 June 2010
Interesting press release from R3: Generational attitudes indicate more young people heading for debt disaster than older peers
R3 have published an interesting piece of research entitled: "Generational attitudes indicate more young people heading for debt disaster than older peers." The research explores the experiences of people struggling with their debts. The research reveals that:
"a far higher proportion of younger respondents are more likely to leave their bills unopened and avoid their creditors than older respondents.
- Among those struggling with debt, over a third (36%) of the 18-24 year olds surveyed have not contacted anyone for help as it is ‘easier not to think about it’ compared to just 9% of 55-64 year olds.
- In addition 26% of the 18-24 year olds surveyed say they do not open their bills because they cannot face them, whereas this figure drops down to 10% for 65s and over.
- Similarly 28% of 18-24 years olds surveyed are trying to avoid contact with people they owe money to, whereas this applies to only 11% of 65 year olds and over.
R3’s President Steven Law commented:
“Despite a global recession and near financial meltdown, younger generations are still operating on the basis that high levels of debt are normal and the consequences of this have created a clear generational split. It is extremely troubling that irresponsible attitudes towards debt are entrenched by the age of eighteen as this is likely to lead to a lifetime of financial problems.”
The report also finds:
- Just under a third (30%) of 18-24 year olds cite they ‘don’t know where to go’ as the reason for not contacting anyone for help, compared to 8% of 65 year olds and over.
- Moreover, across all age groups, 44% of those struggling with debts mistakenly believe that debt advice must be paid for.
“If nearly half of those struggling with debts believe incorrectly you need to pay for debt advice, we have little chance of resolving this problem,” added Steven Law. “Most insolvency practitioners, for instance, are prepared to provide their time free for a first meeting with a debtor. Similarly, the Citizens Advice Bureau will provide free advice.”
“In addition, financial advice needs to get away from promoting ‘debt as a way of life’ that some irresponsible lenders use and instead focus on making debt more proportionate to an individual's financial makeup and so avoid long term financial problems,” concluded Steven Law."
Picture Credit: http://upload.wikimedia.org/wikipedia/commons/b/b6/Old_pier_in_arcadia_beach.jpg