bankruptcy reasons

An independent pilot study into the bankruptcy system in England and Wales, says although 50% of people give inability to manage credit as a reason for their financial failure, the causes and effects of bankruptcy are varied and complex.

The bankruptcy courts survey 2005 was carried out by John Tribe of the centre for insolvency law and policy at Kingston University and was funded by the Insolvency Service as part of its evaluation of the insolvency reforms introduced by the Enterprise Act 2002.

The report concludes business failure, divorce, illness and redundancy were the next most-frequently given reasons. The Enterprise Act reforms, which came into force on April 1 2004, seem to have had very little impact on individuals' decisions about bankruptcy with most feeling they had few if any practical alternatives.

The study also showed that, despite its far-reaching effects on their lives, most bankrupts felt the process was a humane one characterised by good communication with the courts, Official Receivers and bankruptcy trustees.

Desmond Flynn, inspector general and chief executive of the Insolvency Service, says: "Rising numbers of personal bankruptcies have received a good deal of media interest and we are please to have been able to fund a major empirical contribution to the debate in this area.

"Too often that debate is conducted on the basis of hard cases and personal anecdote so this research is very welcome and extremely timely. The report concludes that very few people see bankruptcy as an easy way out of their debts but rather that they have no real alternative."