Government seeks views on personal insolvency framework

The government has launched a call for evidence seeking stakeholders’ views and evidence on the personal insolvency framework and whether it serves the needs of debtors and creditors in the 21st century.

The last fundamental review of personal insolvency was carried out 40 years ago. The government is seeking views and evidence on the overall purpose of the framework, how it currently supports those in financial difficulty and how it is funded.

Business Minister Lord Callanan said in situations where people are unable to repay borrowed money, it’s vital that there is a system that is fair to both them and their creditors.

“Our current personal insolvency framework has been in place for many years and so it is only right that we examine whether it works as effectively as it should in today’s world,” she said.

“The government would welcome responses from people who have experienced debt, creditors and their representatives, trade bodies, debt advisers and charities, insolvency practitioners, recognised professional bodies, academics, and any other interested parties. Responses will help to inform our understanding and identify whether reforms are needed.”

Peter Tutton, head of policy, research and public affairs at StepChange Debt Charity, said he knows from clients that personal insolvency remains poorly understood, a source of potential fear and perceived stigma, and in many cases expensive to access at the outset and risky if circumstances change.

“We look forward to using the evidence from our client experience to help inform the review. We would see success as delivering an agreed pathway, supported by Government, towards a personal insolvency framework that works with debt advice to deliver sustainable, affordable and fair debt relief for those who need it, under a well-regulated and effective supervisory regime,” he said.

Eric Leenders, UK finance managing director, Personal Finance, said as part of a highly regulated sector its members work closely with their customers, and with debt charities, to provide tailored support to those facing financial difficulty.

“This support always aims to help customers without the need for insolvency solutions. However, where such solutions are used, they should be accessible, understandable and fair for both borrowers and lenders. As such we welcome this review and will be happy to contribute to the call for evidence,” Mr Leenders said.