Bankruptcy
Scare stories
The experts like to scare people about bankruptcy, claiming that it will make life impossible for years to come and warning people that they must take all steps to avoid it. Of course, it's impossible to avoid if you have debts that cannot be repaid from your income. Those debts don't have to be massive to be un-repayable if you're unemployed. I wanted to avoid bankruptcy because of all the scare stories, but ultimately had no choice. Actually, it proved to be the best option in the circumstances that I found myself. In the event, the fear of bankruptcy was greater than the reality. I'd probably have sorted out the situation sooner if I'd known then what I know now. As with my 1990 decision to take a break from work, hindsight is easy.
Back taxes
The only thing that caused me a little worry was when I was told that bankruptcy involves a very thorough investigation into one's back taxes. As I was self-employed for much of the eighties, I wondered if they'd find anything and what the consequences might be if they did, but I needn't have worried because they never found any problem. Having been told beforehand that the back-tax search is the most thorough possible, I at least know that they never will find any problem with my pre-bankruptcy tax payments. If by some chance they do, I can point out that they should have found it during the bankruptcy proceedings and I would seek legal advice if they pursue the matter.
Stubborn bank
When I found myself in financial difficulties, I first tried to negotiate with my bank. I wanted them to write off some of the debt, leaving me to repay the rest with interest over a period of time. The bank wouldn't countenance such a policy but suggested that I could repay the entire amount outstanding over a period of many years. The required monthly payments (seventy pounds) were well beyond anything that I could seriously consider, so I ended up going for bankruptcy. The bank ended up getting exactly nothing from me, which is much less than they would have got had they been willing to negotiate. Of course, they may believe that, in the overall scheme of things, it's better not to negotiate write-offs with people like me because they'd incur other costs but that's their business.
The bank got some money by selling on the debt, which was re-sold a couple of times after that (I know because I was always told about any change of creditor), but I wonder about the ethics of such practices. Still, that's not my concern, but maybe the 2008 banking crisis will shake up the industry. If banks were not allowed to sell on bad debts, or only allowed to do so under certain circumstances, it might oblige them to offer negotiation.
If I'd managed to secure the kind of agreement that I'd wanted, I'd have been considerably worse off than I am now although I've paid in other ways. Yes, it's a nuisance at times, but given the size of the debt written off (around 13,000 pounds), I can't complain too much. Still, it creates problems for me, some of which are compounded by other policies that could be changed to make things a little easier.
Not easy to borrow
I can do without a credit card (though, ironically, I'd probably be a far less risky prospect now than a lot of people who currently have them) although I'd like the ability to borrow money from somewhere without paying exorbitant interest rates, should an emergency arise. Suppose the landlord suddenly decides to give me two months' notice to quit? That's all he needs to do as I explain in my page about Tenancies, but how would I afford the cost of moving? Actually, I think I'm safe, having been here since September 1998, but as long as the law says two months is all the notice that I'm entitled to, I can never be sure.
Loan sharks
I must point out that never at any stage did I contemplate borrowing money from a loan shark. Indeed, I wouldn't know where to find one, but I strongly advise anybody against the idea. I've heard and read about too many horror stories. It is just not worth it.
Chequebook
I'd certainly like a debit card or a chequebook so that I can buy stuff from Amazon at the prices they advertise on the rare occasions that I have money to spend there. For a while, I bought from Amazon UK using postal orders, which carry a surcharge of close to 9% of the value, but that still didn't allow me to buy from other Amazon sites. When Amazon UK told me that they were discontinuing the option to pay by postal orders, I told a few people that Amazon UK didn't want my custom anymore.
Somebody then told me about prepaid cards so I applied for (and received) a Virgin prepaid card. It's actually better than paying by postal orders. The premium is lower than for postal orders (around 3%, slightly higher if it involves a different currency) but it's still more expensive than having a chequebook or a standard card. It also comes without the protection those cards offer, but it allows me to buy from Amazon USA again when I choose to, although I can't afford to very often. So I can buy stuff via the internet, but I still can't borrow money.
Another annoyance is having to carry large wads of cash around whenever I need to pay my rent or on those rare occasions when I am able to buy a big-ticket item.
An idea
How could the bankruptcy rules be improved? My main grievance is the rigid six-year rule. Whereas convicted criminals are given sentences graded according to the severity of their crimes, varying from a small fine to life imprisonment (there's no death penalty in Britain), no such variation is accorded in respect of bankruptcies. It no doubt suits the banks that everybody gets treated the same, but is it fair?
Some people, like me, end up going bankrupt following the loss of a job or some other situation (such as a death in the family) in which there is a dramatic reduction in income. Contrast people in these situations with those who can only be described as irresponsible and who go bankrupt despite having a steady income, just because they spend beyond their means. I'd like to think that if I get a job again, I could get at least a standard bank account and maybe a credit card. If I get a job before September 2012, the six-year rule may be a blocker. I'd been with the same bank for around 35 years before I hit trouble but this, too, counted for nothing. It was clear from my exchanges with them at the time that they wanted nothing more to do with me, so I certainly won't be bothering them again although I'll watch to see if my old bank ever takes over or merges with my current bank. In that event, I'll try to switch banks again. Is it fair that all bankrupted people are treated the same following their discharge? I think not. A more flexible system is needed in today's society.
In the wake of the 2008 banking crisis, the banking industry will argue that now is the worst time to be considering such issues. True, but their problems stem from their own irresponsible lending and gambling. Any loan that appears responsible can be made to appear otherwise if the borrower suffers a sudden loss of income during the period of the loan. If my ideas were implemented, banks would be obliged to take a more responsible attitude to lending even without the 2008 banking crisis to consider. I think that my idea remains good despite the crisis.
Crosby, Brown and Goodwin
The three most guilty Brits of the 2008 banking crisis are Sir James Crosby, Gordon Brown and Sir Fred Goodwin. I'd like to see them all given a one-way ticket for a journey on the Marrakesh express, never to return.
No comments:
Post a Comment