bankrupt young people

[sammmo]

I see there is a record amount of young people going bankrupt. What i was wondering was, If a person goes bankrupt and his debt is wrote off. Who actually looses money. Do the banks absorb the debt or do they claim anything from the government because the courts have made this person bankrupt.. in other words do the banks lose out or the taxpayer?

[Postdog]

and who do you think pays the banks?

[Clanad]

Unless you have a totally different system there than here in the U.S., the bankruptcy has nothing to do with the government, other than the process complying with laws and the process being under the jurisdiction o f a bankruptcy court.

Everyone loses, of course... any holder of debt to the bankrupt, including banks, businesses and even individuals that may have loaned the person monies, as well as the bankrupt person themselves. Depending on what State they live in, some personal poseesions are exempt from claims, but any savings, (kids college funds) and other things of value are confiscated and sold at auction to recoup as much of the loss as possible.
Business bankruptcies are somewhat different, but, there again, the Federal government's interest is pretty much nil... (unless it's a Federally chartered instituion, like a bank...)

[tonywiltshire]

The Banks and other lenders lose the money that is written off in Bankruptcy, Individual Voluntary arrangements (IVA) and Debt Relief orders. They estimate bad debts and increase the borrowing rate to compensate for this; the Government do not make any form of refund.
To answer your question, in the first place the lender loses out but as this is passed on to the other borrowers in higher interest rates you could say that other borrowers lose out.

[New Judge]

Quite so.

Just about the only person who does not suffer a loss is the person or organisation going bankrupt. It's quite a good system really, especially for limited companies (whose directors simply start up a new, often identical, business having just knocked a load of their creditors).

The sanctions against those going bankrupt are nowhere near as long lasting or as stringent as they should be and it has become an easy option to clear excessive debt.

[sammmo]

Thanks for the imformation. So basically savers lose out on the loss of interest they would get and borrowers lose out by having to pay extra.therefore the banks don,t actually lose out by allowing people to rack up excessive loans on there credit cards that they have issued. This seems very immoral to me. Why do the banks get away with this?

[annie0000]

Never mind the banks, how do the individuals get away with it? There is a difference between normal people who are generally responsible who find themselves in impossible situations not of their own making and people who spend up on plastic buying things they should be saving for then just expecting someone else to pick up the pieces.

[sammmo]

Exactly Annie but the banks must know who these people are. I would know who was having trouble repaying me if I were a money lender.. How can they allow these young people many of them on basic money . To have so much credit.

[annie0000]

that's true also sammo - i think the other issue is that the people they are lending to lie. They will get credit from several sources based on the same outgoings without telling them what other debts they have. E.g. Several credit cards/store cards/mobile phone companies/furniture shops/car loans etc etc etc. each lending on the same income assuming that they can afford when actually that income is promised to many others already.

[tonywiltshire]

I would not like individuals to consider Bankruptcy as an easy option when in severe debt, there are serious consequences for an individual going bankrupt and it should be considered a last resort. You will be Bankrupt for one year and the fact will be recorded on your credit file for 6 years, if you own a house you will probably lose it and there could be serious consequences for a partner if you have taken a joint loan with them. I would urge anyone considering Bankruptcy to first speak to a professional debt adviser.

[jake-the-peg]

Yes Tony I'd agree a lot of people (some of the above) seem to think bankruptcy's an easy option I can only assume they've not known many personally.

There are of course newer "easy" bankruptcy's now for I think people with debts less that £5,000 and assets less that £800 ( I think those are the right figures )

This seems sensible as it stops them racking up further debts trying to escape the mire whilst also saving the more unscrupulous/or stupid lenders loaning them more

[tonywiltshire]

You may be thinking of a Debt Relief Order j-t-p, debts of less than £15K and assets less than £300, with a car worth a maximum of £1,000, there are other restrictions.

[New Judge]

Oh dear, jake. What a disaster! One remains bankrupt for a whole year and it stays on one’s record for a whole six years. Quelle domage!

Meantime the people who have had to forfeit the money the bankrupt person owes them have no such draconian measures laid against them. They, the lucky sods, have to simply pull their boots up, just stand the loss and work that little bit harder to make their ends meet (unless they are forced into bankruptcy themselves, that is). Not for them the luxurious option of having their debts written off in exchange for a bit of control over their affairs for twelve months. I have known personally people who have gone skint. It was the best thing that ever happened to them and almost a deliberate part of their game plan. Their excessive debts (from which they still retained much of the benefits) were simply written off. A year without a cheque book living from their partner’s bank account and - hey presto! - off they go again.

I didn’t say that bankruptcy was an easy option. It is not and should not be easy. But the consequences are too lenient and short lived. Debts should not be written off, but held in suspension so that when the individual regains his financial stability he can resume paying off his debts before resuming the Life of Reilly. As for corporate bankruptcy, don’t even begin to start me off!

[tonywiltshire]

The restrictions on Bankruptcy need not be as simple or easy as NJ claims.

After a Bankruptcy order is made the court will notify the Official Receiver whose
function is to:

1/ Investigate the Bankrupt persons conduct and financial affairs and report to the court.
2/ Obtain control of the Bankrupt persons property and any relevant documents.

The Bankrupt person is deprived of ownership of their estate, and the person appointed Trustee is charged with gathering and selling all of the property previously owned by the Bankrupt person and distributing the proceeds to the creditors. It is an offence on the part of the Bankrupt person to do anything that intentionally conceals information or property from the Trustee; criminal charges can be brought which could lead to a fine or imprisonment.

There are pre-discharge restrictions and those who may have acted recklessly, irresponsibly or dishonestly may be made subject to Bankruptcy restriction undertaking or a Bankruptcy restriction order.

The consequences of bankruptcy can be draconian.

[New Judge]

And so they should be. But often they are not.

[sammmo]

I'm with you new judge, Why should these debts be written off forever. if and when these people become more solvent they should start to repay some if not all the debt they left others to pick up.

[tonywiltshire]

All secured debts, Overpayment of benefits, Council tax, Student loans (depending on date), Fines, Maintenance and other Family Court orders, Debts for personal injury claims and Debts incurred through fraud are not written off.

Bankruptcy is not the easy option that some people think it is.

[dinawatson691]

maybe, the bank is absorbing the debt.