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Insolvency Law

Expert guidance on all aspects of corporate and personal insolvency

03 JUN 2009

Moore Stephens on Stigma - a true reflection of bankruptcy usage?

A recent publication by Moore Stephens entitled, "Stigma, what Stigma" contains the following sentence: "The stigma of bankruptcy may fairly be said to have well and truly disappeared." This statement is based on the first quarter 2009 insolvency personal insolvency statistics. The firm's contention may well be true, but the evidence to date, including commissioned work (BCS 2005) for the Insolvency Service (IS) and the IS's own research (Attitudes to Bankruptcy Revisited, see page 8) shows the opposite to be the case. Bankruptcy still carries social stigma despite Moore Stephens' contentions to the contrary.

The proper question to ask is what drives redress to bankruptcy? The answer is, inter alia, insolvency. Stigma is an adjunct experience which affects those who go into the procedure. It is not a driver according to the research cited above. Stigma does not affect the vast majority of debtors in terms of a conscious decision to enter bankruptcy, i.e. evidence suggests that a conscious choice, based on social perceptions of how they might be perceived by others, such as whether they will stigmatised for going into bankruptcy, is simply not made by debtors. They are insolvent, they need a relief and rehabilitation mechanism, the seek redress to the bankruptcy laws. They do not, as Moore Stephens seem to suggest, think "Hang on, Bankruptcy looks socially acceptable now, I will therefore do it."

The fact that there has been a dramatic rise in redress to the regime can be more properly put down to the simple fact that more people are insolvent than has hitherto been the case due to a number of reasons, what we might call drivers of personal insolvency. I may of course be wrong. More research needs to be done on post-Enterprise Act 2002 perceptions now that the BCS 2005 is some three years out of date. Perhaps the beginning of 2010 will see another IS Attitudes to Bankruptcy Revisited.

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