BANKRUPTCY, which comes from the old Italian word bancarotta, or broken bench, used to carry great stigma.

But experts say that changes to bankruptcy laws mean it is now ‘a pragmatic option’, rather than a ’ lifeshaming event’.

Under the 2002 Enterprise Act, those who declare themselves bankrupt can have their debts discharged after one year rather than three.

It is even possible to apply for bankruptcy online, making the process easier and less humiliating.

When debtors are declared bankrupt, assets such as their home and investments can be sold to pay their creditors.

This is why it is an increasingly popular option among the young, such as students who have no assets but a lot of debt.

In 2001, 7.9 per cent of bankrupts were aged between 18 and 29. Today the figure is 18.7 per cent.

The Insolvency Service insists that the soaring number of personal insolvencies is nothing to do with changes to the law.

An increasingly popular alternative to bankruptcy is an individual voluntary arrangement.
With an IVA, the debtor can make a deal with creditors to repay a proportion of the debt over a period of time, usually five years.

An insolvency expert checks that payments are made. At the end of the IVA, any outstanding debt is usually written off.

Daily Mail
May 2006

Benedict Mackenzie comments: I am certainly seeing this reflected in the increasing number of enquiries from people in their 20’s, still living at home, with no realisable assets, but with lifestyles above their means! The best recommendation has to be bankruptcy, these days.