More primary source comment from debtors at the RCJ

The recent spate of newspaper articles on debtor experiences at the Royal Courts of Justice (RCJ) Bankruptcy Registry has been joined by a discussion piece in this week's Sunday Telegraph written by Ms Olga Craig. The piece is entitled: Bankruptcy: the hardships behind the headlines. It is an interesting piece which adds more primary source discussion from RCJ debtors to the melting pot. Here is the text of the piece: 
"Deep in the bowels of a Sixties tower block, behind the law courts and tucked at the bottom of a winding pastel-blue corridor, the waiting room boasts no sign. Instead, it bears only an anonymous number: Room 1:10.

Inside, almost all the seats are taken as the ashen faced, the weeping and those whose gaze is glass-eyed and trance-like, wait for their names to be called. There are slightly more men than women, but only just. Some are in shabby suits and scuffed shoes, others smartly dressed in best suits and starched shirts. Some twist their fingers nervously, reluctant to talk. Others whisper nervously to their neighbours, men and women they have never met before but with whom, in this quiet waiting room, they have forged an immediate, and possibly life-long, bond.

They are an assorted crew; some have lead modest lifestyles, many others have enjoyed years of affluence. But whatever their backgrounds this morning, they have one thing in common: each has an appointment before the registrar at London's Royal Courts of Justice, which is now Britain's busiest bankruptcy court.

The reasons they are here are complex and often harrowing. Each has a tale of personal misery, woe, human hardship, failed businesses, broken families and shattered dreams. And now they must suffer the ignominy of declaring themselves penniless and unable to pay their creditors. Some have been openly profligate, but many, many more are merely the victims of the current credit crunch and the ensuing recession.

But what is certainly true is that their numbers are swelling daily. "More are coming through our doors,'' says Judith March, director of a tiny charity called Personal Support Unit, which offers support and practical information for litigants at, among others, the Royal Courts of Justice in London. ''And, increasingly, they are in the more affluent bracket.''

Miss March knows all too well the misery many have endured. "It's not unusual for us to have grown men cry,'' she says. ''And many find it much easier to talk to a stranger, someone they don't have to see again.''

The latest figures from the Insolvency Service indicates that Britain is facing a bankruptcy timebomb, with record numbers of individuals and companies predicted to go bust this year. Begbies Traynor, the insolvency and restructuring group, believe that more than 35,000 firms will go under this year – equivalent to more than 95 a day – and could rise as high as 40,000. That figure is almost 20 per cent higher than during the crash of the Nineties but, what is perhaps more alarming is the revelation that as many as 125,000 people will become bankrupt in the next 12 months – many more than the 107,000 peak in 2006 and representing some 342 each day.

The evidence is there for all to see. Richard Goodwin, editor of The London Gazette, the newspaper of record that prints personal and corporate bankruptcy notices, says that the number of pages they printed reached an all-time record last month – averaging 96 a day – up from 85 in 2008 and 78 in 2007.

As Nick Hood from Begbies points out: ''The rate is accelerating – on a bad day we could see 20 businesses going under. Companies that you wouldn't imagine going bust in the last recession are going to the wall this time. It feels much worse than the Nineties. There are far fewer options to rescue businesses today. In the past, you could go to another bank, or small-business owners could remortgage and use equity from their homes. Today, that is next to impossible.''

Traditionally, during an economic crisis, it has been men who have been at the front of the bankruptcy queues: but in the current credit crunch climate what has been particularly noticeable are the numbers of women facing financial ruin. In the past six years the number of women bankrupts has risen fourfold. According to the Insolvency Service, 23,173 women were declared bankrupt last year, some 60 a day – up from just 6,641 in 2002. Among men, the figure was 37,972, roughly two and a half times the 15,741 declared bankrupt in 2002. All in all, women now make up almost 40 per cent of bankrupts – up almost 10 per cent in six years.

There is no way of knowing definitively how differently the sexes react to debt. However, among the women emerging from the bankruptcy court last week, the majority said that instant relief had been their first emotion. Julie Peterson, 41, from Islington started her own cosmetics firm two years ago. Now she owes £36,000 and has been declared bankrupt. The strict rules surrounding the procedure mean that while debts are discharged after a year, the bankrupt loses all assets and their credit is affected for many years. ''But I don't care about any of that,'' Julie says, ''I just feel a terrible burden has been lifted. I am going to lick my wounds and think about how to start over.''

Others were more reluctant to talk. In the corner of the room sits a middle-aged man huddled deep in a cashmere overcoat. His eyes are red rimmed. ''Sleeping poorly,'' he says, deeply embarrassed. The tears are not far away. ''Put it this way,'' he says, biting his lip. ''I've lost the business, I know I will lose the house. And I doubt my wife will stay. But worse than all that is the shame, the utter humiliation of failure.'' He doesn't want to say any more.

Henry Wilson, 62, is all too familiar with that concept of failure. Bankrupted last year, he admits he was driven to despair and considered suicide.

''I looked it up on the internet,'' he says, his voice wavering. ''But I doubt I would have had the courage to do it. It was the sense of failure, the sense that I had let down my wife and family. I remember walking to the local post office the day after I was declared bankrupt. I saw a billboard for the local newspaper which read: ''Local businessman goes bust.'' I cannot describe the humiliation. I had been someone, someone with a reputation in my little, parochial area. Now I was a failure. And though I knew that this was an industry failure, not a Henry Wilson failure, I felt belittled.

''It did affect my marriage. Somehow, within my family circle it was seen as my failure. There were rows. Silences. My wife had taken a back seat in the business and felt it was my fault.

''There were times when I booked into hotels for days at a time, just to get away from the pressure. From the criticism, from all the strain and acrimony."

Two years ago, Mr Wilson and his wife ran an extremely successful business as tour operators specialising in European holidays. Mr Wilson, from Surrey, started the firm 10 years earlier, when he was 40. At 50, he took early retirement as a senior manager with HSBC bank. In its heyday the company had a £4.2 million annual turnover.

''Times were good,'' he admits. ''I wouldn't say we lived a flashy lifestyle, we poured a lot of the profit back into the business but, yes, there were the 4x4s, the luxurious homes, the three boys went to good public schools. It's fair to say we were affluent.''

In 2007, came the first real warning that all was not well. Late summer bookings, known as ''lates'' in the industry, slumped. Instead of the predicted 500 bookings in July and August, Mr Wilson received fewer than 200.

As a former bank manager Mr Wilson straight away informed his lender. ''They immediately brought in the big armour,'' he says bitterly. ''The bank was selfish, all they wanted was to ensure they were OK.''

Mr Wilson proposed a plan under which he would pay back the £100,000 shortfall in two years, but his creditors were not interested. Instead, they had him declared bankrupt, ensuring their insurance paid them in full. ''They just wanted money fast,'' he says wearily.

The humiliation, he says, was hard to take. ''I think it was harder because I wasn't just some street trader. I was a former bank manager and some thought I should have known better.''

Today, the Wilsons are fighting the charge the bank has brought against their house. ''I'm public school educated, I'm stoic, I'll shoulder what comes,'' he says. ''But my wife, that's another matter. I just don't know how she would cope if we lost the house. Not on top of the shame and humiliation.''

Steve Phelps, 53, who lives with wife Diane, 51 and daughter Victoria, 15, near Yeovil, Somerset, understands those emotions all too well. Last week, he was declared bankrupt after his carpet business failed. With a ''suspended possession order'' hanging over his home, he must meet his next two monthly mortgage payments of £968 if he is to have any hope of keeping a roof over his family's head.

''Losing the house is my biggest worry,'' he admits. ''But the endless seeking work and getting nowhere is so dispiriting.''

Mr Phelps, like many, acknowledges he may have made mistakes, but lays the blame firmly at the door of the Government. ''This is a worldwide problem created by bankers. For the Government to encourage us to spend our way out of it is ludicrous.''

He has good reason to be critical. Many financial experts believe that Labour's introduction of the 2002 Enterprise Act, which made the bankruptcy process much easier and was aimed at removing much of its stigma, has only encouraged the problem. Its critics claim the act served only to create a mood of easy credit with no down side.

Last week, the Government once again moved to speed the bankruptcy process by introducing Debt Relief Orders, a controversial new ultra-fast form of bankruptcy. In essence, they are aimed at families on low income and will allow those with debts of less than £15,000 to ask the Official Receiver to write off their borrowings. After 12 months, they will be discharged and allowed to start afresh.

''Basically, this is quick and easy bankruptcy at the click of a mouse,'' says Anthony Cork, a director at Wilkins Kennedy, the accountancy firm. ''Huge numbers of borrowers will be able to walk away from debts without the deterrent effect of a genuine bankruptcy. But it will mean that banks will be more reluctant to lend to those with few assets or poor employment histories. Which could force more and more sub-prime borrowers into the arms of loan sharks.''

At the bankruptcy court yesterday, there were few who could benefit from the new Orders. No one there who was willing to talk owed under £15,000.

''If I owed that little I wouldn't be lying awake at night wondering how to feed my family,'' one man said bitterly. ''In the past few years, banks have been throwing credit cards at people like me. Now they wonder why I am in debt.''

Shaking his head he walks towards the court room door. ''Is it any wonder people call this place the abattoir?'' he asks over his shoulder.

''It's where you come to get slaughtered.''

Picture Credit: Muir Hunter Museum of Bankruptcy, KU, (GP).


This article is very timely and relevant. As I quote Cameron Muir, an economist, "Home sales are unlikely to fall much further..That being said we expect home sales not to decline much further."

But it's never too late, with the right business plan set up, it will lead to valuable outcome. This is what most counselors would give as an advise.