Debt fee 'excludes most needy'

Published on Sunday 8 June 2008 22:10

NEW rules aimed at helping thousands of debt-ridden Scots by allowing them to declare bankruptcy will fail to help some who most need it, according to a report.

Citizens Advice Scotland says a 100 charge for individuals who want to make themselves bankrupt is preventing people on the lowest incomes from accessing the scheme and ridding themselves of crippling debts.

Since April, individuals have been allowed to declare themselves bankrupt if they fall into a new "low income, low assets" (LILA) category.

Previously, people unable to pull themselves out of crippling debt could only become bankrupt if a creditor took them to court.

Citizens Advice Scotland says few creditors would go down this route, meaning debtors would face endless harassment from companies pursuing money from them.

As many as 5,000 people in Scotland are likely to become bankrupt through the new scheme this year.

A report by Susan McPhee, head of social policy and public affairs for Citizens Advice Scotland, says: "Anecdotal evidence from the bureau has suggested that the scheme is being accessed by some of our debt clients. However, it also suggests that there still remain certain groups of people who are being excluded from using the scheme due to the barrier presented by the requirement to raise the 100 application fee."

These include people on benefits, very low incomes and those suffering health problems.

A spokesman for the Scottish Government said the LILA rules are "a last resort out of the spiral of debt for those who can't afford it and simply have no option other than bankruptcy".

He added: "It is not our experience, so far, that the fee is proving to be an obstacle to the many debtors who have applied."