In June last year we published an article critical of the fact that the public record of a person’s bankruptcy is kept forever open. We pointed out that this approach is antipathetic to the notion that bankruptcy is intended to provide a fresh start, at least after the three year discharge period. Our position remains that the bankruptcy record should be expunged after, say, five to seven years in the same way that other credit history is wiped from the record.
We also used the forum provided by our e Update’s to state our view that S110 of the Bankruptcy Act, a section that appears to have its genesis in a 1728 court decision, has not only outlived its usefulness, but is quite capable of providing what are clearly inequitable outcomes. We also pointed out that the law contained in S110 was wide open to manipulation. Lastly we observed that bankruptcy trustees could be required to spend much time (and therefore creditor’s funds) on complying with this antiquated section.
If you missed these articles they are available on our website. How Long is the Bankruptcy Shadow?
How Relevant is a Rule Created in 1728 to a 21st Century Bankruptcy?
It would be nice to report that our views have prevailed and that changes are expected… but that has not happened. However, despite this, we believe that publishing our views is a healthy exercise and will in due course at least add to the debate, and may lead to reform.
That being the case we have another issue to air. It seems to us that the label “Bankrupt” may have outlived its usefulness, at least as far as small debtors including consumer debtors are concerned.
“Bankruptcy” is, we believe, a highly pejorative term. It conjures up, at least in some people’s minds, suggestions of wrong doing and of financial profligacy. There is no doubt that the perceived and the actual stigma of bankruptcy has greatly receded over the last twenty years or so, but the Worrells partners know from their regular contact with those facing impossible financial difficulties that they often delay seeking the protection of the legislation simply because they do not want to be thought of as a “bankrupt”. That delay adds to their misery and is not something which the legislation, or society, should want to see happen.
Certainly there are a small percentage of bankrupts who are simply rogues, who appear to have no social conscience, who are indeed profligate. For such people being described as bankrupt is entirely appropriate. But to lump the unemployed worker who has impossible credit card debts under the same heading appears wrong.
We acknowledge that finding an alternative term for small debtors and consumers is difficult, as is finding an appropriate cut off level. But we would like to see the problem tackled.