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The Scottish government has once again trumpeted the success of its Debt Arrangement Scheme (DAS) in a press release earlier this week. The Minister for Business, Innovation and Energy, Paul Wheelhouse, states that it ‘is the only statutory debt management programme in the UK and we are rightly proud of its success in providing a viable option for those seeking to pay their debts without plunging into insolvency’. Lord Wilf Stevenson, chair of Step Change Debt Charity also lauds the Scottish scheme as an example of how things work better in debt management North of the Border (see here) and the Treasury recently completed a consultation on the possible introduction of a similar scheme in England and Wales.
But what evidence exists to support these optimistic views on the Scottish scheme?
The Scottish Debt Arrangement Scheme (DAS) is a statutory debt management plan. Its benefits include a stay on individual enforcement action by creditors, the freezing of interest and penalty fees and the possibility of a debtor retaining a home. Plans can be imposed on creditors by the administrator (the AIB) if creditors do not consent, provided the plan is fair and reasonable. Individuals make a single payment through a payments distributor (one of four private sector organisations awarded the contract by the government) who can charge a fee of 8 percent. An individual must consult an approved money advisor before commencing a DAS. Both public and private advisers now act as intermediaries with the majority of applications now handled by private advisors (dominated by a few specialists) who can charge a fee. Debts can only be written off after 12 years, if seventy percent of outstanding debts have been paid. Data from 2012 indicate that they last on average 6 years 8 months. Fifty-four percent of users are female with an average age of 44 a median level of debt of £12, 913, making an average monthly payment of £238.
The Scottish government highlights the benefits of the plans for creditors, claiming a 90 percent return rate. However, this is misleading since it assumes that all plans are completed. Data (see Table below ) which I obtained from the Scottish Accountant in Bankruptcy suggest that at least 25-30 percent of files are revoked and the dominant reason for revocation is failure to pay when due. Thus of the 3,939 cases commenced in 2012-13, 1139 had been revoked by 2017. In addition, given the long time scale of these plans the amount recovered should be discounted and it is possible that some of these debts have already been written off by creditors and bought by debt buyers who will profit from any recovery.
These long term debt plans may be producing modest income for individual creditors but one must question whether it is socially beneficial to have individuals shackled to a repayment plan for so long. The Scottish government is committed to the principle of ‘can pay should pay’ and Fergus Ewing (then the relevant Minister) celebrated the fact that many individuals were choosing the longer road of the DAS because it demonstrated that ‘most people want to pay off their debts when they can’ (at 25929) and that ‘bankruptcy should not be an easy option’ (same). However these comments neglect the growing international literature (see discussion here and here ) on the economic and social benefits of bankruptcy providing a swift fresh start for debtors. There is a danger of increasing the already significant social stigma associated with bankruptcy when there should be greater recognition of its value as a safety net in contemporary economies with high levels of household debt.
Individuals generally do want to repay their debts but many individuals who are in debt trouble suffer from continuing problems in terms of unstable employment. Long term debt problems have effects on the health of individuals. Behavioural studies suggest that individuals are often over-optimistic and will underestimate the difficulties of maintaining repayments over a long period. Their credit rating will continue to be low after they complete the plan and is unlikely to be better than if they declared bankruptcy.
Unfortunately almost no systematic studies exist (see here) of the experience of individuals who have succeeded or failed on DAS (and ideally a control group who could have but did not choose to undertake a plan). The 2012 study did suggest that there was a trend among young individuals to take out a DAS to repay smaller amounts of debt and a DAS could be useful for an individual caught up in high cost credit problems. So the DAS may be useful for some debtors. Or it may represent simply a benign state sanctioned collection agency and, given the long length of the repayments–almost a form of ‘debt peonage’.
But once again we encounter the failure by governments to develop good evidence based policy in the area of bankruptcy. The danger is that a form of DAS (with its “breathing space”) is layered on to the unnecessarily complex system of personal insolvency alternatives in England and Wales without a reappraisal of the existing system.
Scottish DAS Agreements: Closed, Live and Revoked
Source: Scottish Accountant in Bankruptcy.
This post is a video. Here at: https://www.youtube.com/watch?v=_sCAG3Cn0O0&index=24&list=PL_voamVqJ_ZyVoZdGh4ov5u1PseEJxwEX
Damning report on debt management advice by Financial Conduct Authority–need for comprehensive review of insolvency alternatives
The FCA published on Thursday 25th June a damning thematic review on the quality of debt management advice, concluding that the quality of advice was of an ‘unacceptably low standard’. Advisors often did not make an adequate assessment of individuals’ revenues and expenditures or give balanced information about insolvency alternatives. For example, they often reinforced customers’ initial reluctance to consider bankruptcy and played on misconceptions about bankruptcy to deter them from this alternative. The FCA reported ‘many instances where customers were recommended very long-term debt management plans (often many decades…) when debt relief solutions are likely to have been more appropriate but adequate information and advice was not provided”(para 4.55). In one case a debt advisor failed to correct a debtor’s misconception about the effects of bankruptcy and recommended a debt management plan lasting 125 years! Firms often had incentive structures for selling debt solutions.
The study was primarily of the fee-charging debt management industry but it was also critical of those firms providing free debt advice to consumers, indicating that there was ‘scope for material improvement’.
These findings are perhaps not surprising given the continuing concerns expressed about practices by some debt management companies by Parliamentary Committees and the Office of Fair Trading. Studies in other countries have raised similar concerns. In a recent article Stephanie Ben-Ishai and Saul Schwartz studied how not-for-profit Credit Counselling Agencies in Canada gave advice to individuals with debt problems. Using carefully scripted mystery calls to credit counselling agencies Ben-Ishai and Schwartz found that the agencies surveyed did not present the options for dealing with a debtor’s financial in a complete and impartial manner and did not present bankruptcy as a viable option. The focus was on ‘fitting the caller into the requirements’ of a debt management plan. They concluded that although the agencies portray themselves as debtor-friendly they operate rather as collection agents.
A fundamental concern in England and Wales raised by the FCA report is whether these practices by debt management companies are undermining public policy on debt relief by steering individuals to debt management plans rather than permitting individuals to make a ‘fresh start’ through bankruptcy or a debt relief order and becoming productive again. Joseph Spooner and myself have commented elsewhere on whether England and Wales has struck the right balance between the wide variety of repayment plans, sometimes lasting many years, and the straight discharge of most debts. Almost one-third of Individual Voluntary Arrangements fail to complete. Many individuals may choose a repayment plan because they assume it will be better for their credit rating (and they may be able to retain their home) but credit reference agencies make little distinction between bankrupts and those who have been on repayment plans. The complexity of the English system with its many alternatives also creates difficulties for individuals choosing the best option, and increases the power of private and public intermediaries in the system, whose financial incentives may not align with public interest concerns.
Several countries (Canada, US, Scotland) now include debt counselling as part of the individual bankruptcy process but evidence is limited as to its beneficial impact.
Many official inquiries have supported the integration of counselling in the debt enforcement system. In the 1960s and 70s counselling was justified by the perception of a debtor as needing assistance in managing her financial affairs and possibly having wider problems in coping with life. The English Payne Committee (1970) proposed a social service office for debtors as part of a state enforcement office based on ‘abundant evidence that many debtors incur and fail to pay their debts because they are inadequate personalities or irresponsible in managing their affairs… They need to be assisted to financial health and stability.” (para 1210) Social workers would ‘perform for financially incompetent or inadequate or irresponsible debtors, the functions which are discharged for more successful members of the community by bank managers, accountants or solicitors’ (1216). The influential Brookings Commission study (1971) in the US proposed that financial counselling should be available to all debtors after finding that 31 percent of debtors attributed their problems to poor debt management, and the US Bankruptcy Commission(1973) proposed that access to bankruptcy should be dependent on a debtor receiving counseling by the new administrative agency which would administer the bankruptcy process. The Bankruptcy Reform Act 1978 contained no formal requirement for counselling. The US National Bankruptcy Commission in the late 1990s endorsed the introduction of counseling on a voluntary basis.
Canada pioneered in 1992 the legislative introduction of two counseling sessions during bankruptcy for individual bankrupts (see here). The objective was to prevent repeat bankruptcies and to further rehabilitative goals of behavior modification. The Insolvency regulator (Office of Superintendent of Bankruptcy), debt counselling agencies and the Canadian Bankers Association supported its introduction. In Canada the trustee (or their delegate) must now: (1) make a pre bankruptcy assessment outlining options including that of a consumer proposal (repayment of a portion of debt usually over three years), (2) provide an initial counseling session shortly after bankruptcy is declared entitled consumer and credit education and (3) a second session shortly before discharge which normally takes place nine months after the declaration of bankruptcy. Counselling is financed by a fee which comes out of the bankruptcy estate– $85 for each stage of counselling-usually made from income payments by bankrupt. Ninety percent of the sessions last under one hour. Counselling is a condition for receiving a discharge. The current Directive (OSB 1R3) defines it as ‘educating debtors on good financial management practices, including the prudent use of consumer credit and budgeting principles, developing successful strategies for achieving financial goals and overcoming financial setbacks and where appropriate making referrals to deal with non-budgetary causes of insolvency (ie gambling, addiction, marital and family problems)’.
Has the Canadian system of counselling achieved its objectives? It is difficult to measure this rigorously because one ideally needs a control group who go through the process without counseling. In early reviews bankrupts generally were favourable in their assessments of counseling. But does counselling change behavior or result in fewer repeat bankruptcies? The only rigorous study of the Canadian system using a control group, conducted by Saul Schwartz and published in the American Bankruptcy Law journal in 2003, concluded that counseling did not lead to ‘any appreciable improvement in future creditworthiness’ and ‘has little effect on repeat bankruptcies in the first five years after an initial bankruptcy filing’. In Canada the overall repeat filing rate has increased from 10 percent in 2002 to 15 percent in 2011 and 16 percent in 2012. Notwithstanding these data a recent evaluation in 2013 by the Canadian Department of Industry argues that counselling has a positive impact because ‘debtors found the sessions useful’. The report admits that ‘determining the effectiveness of mandatory counseling is challenging because it is difficult to disentangle the results of two counseling sessions from the broader changes that occur in a bankruptcy or insolvency’. The study suggests some short-term changes in understanding and behavior by debtors and notes that repeat bankrupts were slightly less likely to cite overuse of credit as a reason for bankruptcy. But the study is hardly a ringing endorsement for mandatory counselling for all bankrupts.
In the US the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) introduced mandatory counselling at the pre-bankruptcy stage as an eligibility condition for filing for bankruptcy and also required bankrupts to undertake a financial education course during bankruptcy as a condition of receiving a discharge. Pre-bankruptcy counselling is premised on the assumption that debtors turned too quickly to bankruptcy as a solution for their problems. The Act is vague on the contents of the financial education course but the Federal US trustee has promulgated rules which indicate that the course must include budget development, money management, wise use of credit (including distinguishing wants from needs), consumer protection, and coping with unexpected financial crisis. The financial education course must last a minimum of two hours but may be completed in person, over the phone, or through the Internet.
Michael Sousa in a recent article surveys existing pre- and post- BAPCPA studies of voluntary counselling in bankruptcy. He also presents the results of a qualitative study of the effects of the BAPCPA counselling requirements. Most debtors did not find the courses helpful. Pre-bankruptcy counseling was just ‘jumping through hoops’. It did not have the consequences hoped for by Congress–where debtors rethought their decision and entered a debt management plan. Rather it either confirmed the correctness of an individual’s decision to file for bankruptcy or helped to allay any fears about declaring bankruptcy. Most debtors thought that a two-hour financial education course was not enough to provide long-term effects and in any event was often inappropriate since many individuals filed for bankruptcy because of external economic changes unrelated to financial capability. Sousa concluded that the existing BAPCPA counselling requirements are ‘by and large misguided and are in desperate need of overhaul and reform’.
Scotland recently introduced counselling in the 2014 Bankruptcy and Debt Advice (Scotland) Act which Act will, according to the relevant Minister, Fergus Ewing, deliver ‘the most significant change to the bankruptcy process in Scotland for a generation and take us closer to making the financial health service a reality’ (more on this claim in a subsequent blog). Individuals must consult a money advisor before obtaining access to any statutory debt relief. The policy objective is that of ensuring that individuals are aware of all debt relief options, although I suspect that it is partly motivated by the objective of ensuring that individuals do not enter too easily into writing down debt rather than the statutory Debt Arrangement Scheme which will generally require full repayment (again more about this on a further blog). Financial education during bankruptcy is not mandatory for all debtors. Only repeat bankrupts within the previous 5 years, or debtors subject to a bankruptcy restriction order made against them must undertake a course. In other cases a trustee may refer a debtor to a financial education course where ‘the trustee considers that the pattern of behavior is such that the debtor would benefit from a financial education course or the debtor agrees to undertake a financial education course.’ The Scottish legislation recognises that counselling is not necessary for all debtors. This suggests that legislators do learn something from comparative experience, since they seemed to be aware of the criticisms of the US provisions.
England and Wales rejected counselling in the 2002 reforms primarily because most groups consulted opposed its introduction. Debtors may therefore experience a variety of advice before and during insolvency, depending on whether they seek advice in the public sector through Citizens Advice Bureaux, non-profit debt counselling such as Step Change, or a private intermediary.
The UK is sometimes contrasted with continental Europe where it is assumed that a more ‘social’ approach exists to counselling debtors. But this is not the case. Counselling is not an integral part of the French process. Although debt counsellors play a central role in Germany, the large demand for their services means that they function more as processors rather than being able to provide substantial financial counselling. In Sweden, a recent official report was very critical of the standards of debt counselling which are operated by municipalities.
Debt counselling in bankruptcy is a programme which in the abstract can attract a broad support. It is a policy around which a coalition of creditor, consumer and debt counselling interests can agree, and for regulators it gives a sense of purpose to the bankruptcy system–so the Scots view it as part of a ‘financial health system’. It is likely therefore to continue to be attractive but experience suggests an unwillingness by governments to invest significant resources in the project.
The credit counselling requirements are often based on the assumption that bankruptcy is a consequence of imprudent or unwise use of credit or the need for individuals to adapt their credit behaviour to more desirable norms. But this is clearly not the case for many debtors who are subject to adverse changes of circumstances, unforeseen health costs or small business failures.
The Insolvency Service released earlier this week statistics on Individual Voluntary Arrangements which provide over-indebted individuals the opportunity to repay over time a portion of their debts. Originally designed for individual business debtors, enterprising accountants transformed IVAs into a mass-produced consumer remedy in the early 2000s. In a recent submission to the Insolvency Service, Joseph Spooner and I raised questions about the extent to which IVAs serve the public interest. The recent IVA statistics underline these questions. The statistics indicate increasingly long IVAs of at least 5 years (the original model envisaged a three-year repayment plan). Only 33 percent of IVAs registered in 2008 had completed by October 2014. Over 35 percent of plans begun that year were terminated with the possible consequence of a subsequent bankruptcy for the debtor. These statistics are on their face troubling and demand further investigation. Perhaps the longer plans reflect the fact that individuals miss some payments because of a change of circumstance such as a period of unemployment or plans are modified. But these individuals might have been better to declare bankruptcy initially and make a swift fresh start, benefiting the economy from greater productivity and increased consumption.
Unfortunately no systematic empirical studies exist in England and Wales of the economic and social costs and benefits of IVAs. No studies have attempted to assess debtors’ experiences of IVAs and whether they have a genuine fresh start at the end of five years. Policy making on IVAs has been effectively privatised. The terms of IVAs are determined through private bargaining between creditor and debtor, against the background of a ‘protocol’ developed by bankers and insolvency professionals with modest input from public interest groups.
The Insolvency Service review discussed in a previous blog also raised the possibility of reforms to the Debt Relief Order procedure.
Debt Relief Orders are a transplant from New Zealand, which first promoted the so-called ‘no asset procedure’ in 2002. The English Department of Constitutional Affairs floated the idea of the DRO in 2004. Its objective was to provide a low cost alternative for individuals who could not pay their debts but who also could not afford bankruptcy (see here). It was viewed as an alternative for individuals currently using the administration order procedure. Evidence indicated that many of this group, primarily women, were unemployed or living on a low-income. They could not afford the bankruptcy fee and perhaps feared its stigma. The DRO would, according to the Department, provide a less stigmatizing alternative.
The DRO is a highly targeted debt relief option, permitting a discharge of most unsecured debts after 12 months. It is limited to individuals with £15000 in unsecured liabilities, less than £300 in assets and no more than £50 in surplus income. It has certain attractive characteristics. It is an administrative process initiated online, uses ‘trusted intermediaries’ (e.g. CABx) to screen debtors and attempts to reduce stigma by not using the term bankrupt (although the media sometimes call it bankruptcy lite). It also builds in safeguards. It can only be exercised once every six years and there is the possibility of sanctioning debtors under a Debt Restriction Order. Because England insists on a ‘user pay’ model of bankruptcy, applicants must pay £90 to access the procedure.
Preliminary evaluation by the Insolvency Service in 2010 of the demographics of users indicates that the majority of users are unemployed (48% in 2013-14) at the time of entry. Women are disproportionately represented (63 % compared with 51% in the population). More under 25s (12 percent compared with 5 percent in population) use the procedure and also slightly more in the over 55 population. Almost 50 percent of users are single, a larger percentage than in the bankrupt population.
The central question is whether the procedure achieves its primary goals of financial rehabilitation and avoiding financial exclusion. Unfortunately the Insolvency Service cannot answer this question because of the absence of data. Although it was tasked with monitoring the success of the DRO, cuts to the resources of the Service mean that it cannot undertake this type of research. Evidence based policy is therefore not possible and the Agency is reduced in its consultation to asking ‘stakeholders’ about their views on this question. This approach hardly substitutes for systematic research on key issues such as the ability of individuals to get credit again, manage precarious finances, not suffer discrimination from landlords, or face difficulties with work. We might hypothesise that the DRO would reduce stress and the mental and physical health effects of debt, and possibly costs to the Health Service. Individuals may however be deterred from taking work during the 12 month period since this might result in a revocation of the order. If this is the case (the Insolvency service provides no hard evidence on this point) then a 6 month period might be more appropriate as adopted in the recent Scottish Bankruptcy Act amendments (see here).
New Zealand assessed its procedure in 2011 (see here). The users of the procedure have a similar profile to English debtors, with an overrepresentation of women, high levels of unemployment and reliance on social security. The review found some real benefits from the procedure: individuals found it easier to manage their household finances, and it had a positive impact on health and family relationships. However debtors on social security continued to have problems and there were some negative aspects such as the inability to obtain new credit, some debtors losing their jobs because of the order, and some landlords refusing to accept them as tenants.
A primary drawback of the process is its limited availability. A swift administrative process should be more widely available. Most bankrupts do not have significant assets or substantial surplus income. About two-thirds of bankrupts in England in 2013-14 had less than £2000 in assets and less than £30000 in debts. They are generally unfortunate in having suffered a change of circumstances or miscalculated finances in an economy where high levels of debt are the norm. Few are trying to act opportunistically. The court process is itself increasingly administrative in character and will be replaced by administrative adjudicators once current reforms are implemented in 2016. There is modest investigation by the Insolvency Service of the majority of bankrupts. And an individual is discharged after 12 months. The main difference is the cost of bankruptcy with individuals having to pay over £700 in costs to access bankruptcy.
Other countries such as Canada have swift administrative processes for individual insolvencies. The great majority of Canadian bankruptcies are processed through a summary procedure (where the realizable assets of an individual are not likely to exceed $CAN 15000) with an individual being discharged after nine months.
Finally, the DRO may not solve the problems of those living in precarious employment or on the margins of society and more research is needed on the longitudinal effects of bankruptcy and DROs in providing a ‘fresh start’. It is a pity that the Insolvency Service was unable to undertake such a study.
The Insolvency Service published on August 6th a consultation paper on two issues: the role of Debt Relief Orders and the amount of debt necessary for a creditor to commence a bankruptcy petition. These topics raise important issues about the role of English personal insolvency law. I will discuss debt relief orders in a subsequent post, and examine in this post the role of creditor petitions to enforce individual debts.
A threshold question is whether insolvency should be a proceeding available to a creditor to enforce an individual debt and my analysis draws on an excellent recent article on this topic by Jason Kilborn and Adrian Walters in the American Bankruptcy Law Journal (for open access see here) which deserves to be read by English policy makers.
Insolvency is a collective procedure providing a mechanism for distributing an individual’s available assets equally among his or her creditors. Historically in English law it did function as a debt collection measure given the limitation of common law remedies and English law continues to permit an individual to use bankruptcy to collect a single debt for over £750 through the statutory demand procedure. Under the procedure the creditor serves a demand for payment which if not paid within 21 days generally entitles the creditor to obtain a bankruptcy order. Twenty one percent of bankruptcy orders (5378) in 2013 represented creditor petitions and 11900 petitions were commenced during this period. This is a much higher rate than in Canada or the US where creditor petitions are extremely rare.
Evidence indicates that a small group of ‘Repeat Player’ creditors use this process–HMRC (tax), some local authorities for council tax and some professional debt collectors. Kilborn and Walters indicate that 34% of petitions were brought by HMRC in 2011. Why do these creditors use this remedy? After all in a bankruptcy they will have to share any assets with other creditors. HMRC no longer has a preferential priority. The reason seems to be primarily that bankruptcy is a powerful threat. Bankruptcy may not only be very costly for a debtor (loss of control over any property, high trustee fees, loss of professional status) but it continues to carry a stigma which can be exploited by the creditor. Under 50% of bankruptcy petitions result in court orders, suggesting that the threats do result in some settlements and an RP creditor such as HMRC may calculate that the benefits to it outweigh the costs. Kilborn and Walters also suggest that they may use bankruptcy as a way of ‘closing a file’, passing on the problem to the Insolvency Service who may have to administer the bankruptcy.
But this use of bankruptcy and its threat are problematic. Individuals may become further indebted in order to repay the individual debt or take some unwise action in response to the threat. Individual creditor action may disadvantage other creditors. Payment to the petitioning creditor is in substance a preference for one creditor at the expense of another violating the bankruptcy principle of equal treatment of all unsecured creditors (creditors try to avoid this by requiring payment from a third-party). Court time is wasted if the court has to dismiss the petition. The process deprives the debtor of the protection of the ordinary courts in individual debt collection where an instalment order may be made for payment. Disproportionate costs and fees may result for a bankrupt. A Newsnight investigation in 2014 documented an individual with council tax debts of £1350 which transformed into a debt of £80,000 through bankruptcy fees. The use of the threat of bankruptcy where there is no real intention of carrying through on the threat would constitute an unfair commercial practice under the CPUT regulations. The Office of Fair Trading in 2009 imposed conditions on the credit licence of Ist Credit, a debt collection agency, for its practice of indiscriminate use of statutory demands where it had no expectation of carrying through with the bankruptcy but used them as a draconian threat. See here and here .
Those English creditors who use bankruptcy most often to enforce individual debts already have a wide range of special enforcement powers including imprisonment in the case of Council Tax. Other countries place greater restrictions on the use of bankruptcy as a single creditor’s remedy. In Canada it is possible for an individual creditor to use bankruptcy to enforce an individual debt but the burden of proof is higher. A creditor will have to prove that a debtor has ceased to meet his liabilities generally and some courts require proof that there is some reason to invoke the machinery of bankruptcy investigation such as suspected fraud or concealment of assets. Only a small percentage of bankruptcy petitions are brought by creditors. In the US, involuntary petitions are possible but extremely rare. US law places several hurdles including a minimum requirement of three creditors for an involuntary petition. See here .
What ought to be the role therefore of bankruptcy as an individual creditor’s remedy in England? The following reform possibilities (either individually or in combination) exist:
- Abolish the statutory demand procedure and require an individual creditor to prove that a debtor has ceased to meet her liabilities generally as they become due .
- Increase the minimum amount of the statutory demand to a more realistic levels (at least over £10,000; Ireland recently revised its limit to €20,000).
- Permit an individual creditor to institute bankruptcy for a single debt where there is evidence that the powers of a bankruptcy trustee investigation would be desirable or that significant value exists.
- Provide greater scrutiny of the withdrawal of bankruptcy petitions and significant sanctions for bad faith withdrawals.
The Insolvency Service is unlikely to adopt bullet point one given the political opposition by creditors and lawyers embedded in English bankruptcy tradition. But this issue should stimulate debate about the role of personal insolvency in English law. Modern individual insolvency law is primarily about debtor relief rather than distribution of assets or investigation of an individual’s affairs. Few individual bankrupts have significant assets which would be worth realizing. An Insolvency Service study in 2008 indicates that over 66% have no or under £1000 in assets. A minority may be able to make some income contribution. Most European countries which have introduced procedures in recent decades for individuals to write down debt only accept filings by debtors (e.g. France, Sweden, Netherlands). The Debt Relief Order in England follows this approach but it has very restrictive entry conditions (which I will comment on in a subsequent blog). General commercial creditors have a variety of sanctions (credit bureau ratings) and monitoring mechanisms. The World Bank recognised this in its 2013 Report on the Insolvency of Natural Persons arguing that modern personal insolvency systems should control carefully the use of insolvency by creditors as an individual remedy.