Longer bankruptcy only adds to debt burden

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THE Scottish Government makes a big play of differentiating itself from the lunatics running the Westminster asylum by emphasising its commitment to social justice.

In many instances it’s justified in doing so – until we come to the Bankruptcy and Debt Advice (Scotland Bill), which won backing following the first debate last Wednesday.

The bill is harmless enough at first glance and certainly has its good moments. But there’s one element (clause four, as it happens) that will make life even harder for the growing number of Scots struggling to escape from financial difficulties.

As it stands, bankruptcy generally lasts for one year but debtor contributions from income can be paid for up to three years. The bill proposes to extend that contribution period to at least four years, with the Scottish Government claiming the move is aimed at balancing the needs of both debtors and creditors.

Sounds reasonable, on the face of it. But the reality of debt is different. Put simply, the longer someone has to repay creditors out of their income the more likely they are to encounter further difficulties, particularly at a time when real wages are shrinking and living costs are rising.

The advice agencies know this, which is why they are strongly opposed to the clause. Citizens Advice Scotland, StepChange Debt Charity Scotland, Money Advice Scotland, the Law Society of Scotland, the Scottish TUC, the Church of Scotland and the Govan Law Centre have all warned of the potentially dire consequences of the change.

Even Lloyds Banking Group – among the creditors that the Scottish Government purports to be helping – spoke out against the change, noting that bankruptcy was about giving people a fresh start rather than prolonging the distress.

Those in opposition had their say during the consultation on the original proposals. The paper initially put forward five different “payment products”. One was for people “assessed as able to make a contribution”, which is the version that ended up in the bill.

Inconveniently for the Scottish Government, however, most respondents said no such product was required. So just 65 of the 129 respondents answered the question as to how long the repayment period should be, with 27 of them opting for three years, one for four years and 32 for five years. Enterprise minister Fergus Ewing said they had settled on four years as a “compromise”. As a basis for legislation it’s flimsy at best, especially as the suggested range of five “payment products” was later ditched.

If the bill is passed intact, as seems inevitable, Scots who have opted for bankruptcy – most as a desperate last resort – will be trapped in bankruptcy for longer than debtors anywhere else in the UK. Debt will tighten its grip on families across Scotland just when they need support, thanks to the so-called progressives in Holyrood.