Call for new-look debt laws

THE law should be reformed to make it easier for people to deal with unmanageable debts, says a leading insolvency expert.

Patrick Boyden, a partner at Pricewaterhouse-Coopers, is calling on the Government to introduce a new scheme to help people recover from debt while still protecting creditors.

His proposed Consumer Arrangement would apply to people who had unsecured debts of up to £30,000 and who would be able to repay creditors at least 20p in the pound over a five year period.

The Consumer Arrangement would aim to simplify the process of negotiating with creditors, making it quicker and easier to put an agreement in place.

It would also rely on an element of trust, with creditors accepting that the offering being put forward was the best one the individual could afford.

But Boyden said people taking out one of the agreements would immediately be declared bankrupt if they failed to make a monthly payment or if they were found to have debts or assets they had not disclosed.

Boyden said the new scheme would supplement the existing Individual Voluntary Agreement (IVA), which was introduced in 1986 for people who had unmanageable debts but could afford to repay some money to credits on a monthly basis.

But he said the problem with IVAs was that they were very heavily regulated and could be expensive to take out, while the process of negotiating with creditors over how much would be repaid could be lengthy.

He added that many people who had financial problems also tended to go for debt consolidation loans, which could mean they ended up putting their house on the line, or debt management plans that could last for up to 20 years.

His call comes just days before the Bank of England is expected to release figures showing that consumers now owe more than £1 trillion in mortgages, loans, overdrafts and on credit cards.