Debt plan drives more into bankruptcy

Much higher numbers have been forced to enter bankruptcy because they do not have any excess income above a reasonable standard of living needed to apply for a personal insolvency arrangement, according to a leading insolvency practitioner.

Michael McAteer, personal insolvency practitioner with Grant Thornton, said more than 500 of the 1,500 people who contacted his firm over the past year enquiring about a personal insolvency arrangement did not have earnings above what is considered a reasonable standard of living and had no option but to apply for bankruptcy. “This is a much higher number than I would have originally expected,” he said.

Under a personal insolvency arrangement, a personal insolvency practitioner will negotiate between a debtor and that person’s creditors. Usually secured creditors, such as mortgage payments are restructured. Any income above a reasonable standard of living is distributed among unsecured creditors for up to six years. After that, the debtor is released from the unsecured debt.