9.1    It has often been remarked that in this country we are more interested in celebrating failure, preferably what we see as the heroic kind, than in acknowledging success. That may be true in the area of sporting endeavour and there seems to be a marked reluctance when it comes to acknowledging business success. It is certainly not the case where business and financial failure is concerned where there is a tendency to stigmatise all failure.

9.2    As has been spelled out above, bankruptcy law treats everyone subject to it in much the same fashion with no distinctions being drawn between the small minority of dishonest, irresponsible individuals and the great majority whose failure is honest and above-board. That is an unfortunate enough state of affairs but matters do not rest there. As Annex C shows there is a lengthy list of enactments that impose prohibitions, disqualifications or restrictions on those who are subject to bankruptcy proceedings, solely on the ground of the existence of those proceedings. In some cases the enactment provides a suspensory regime so that the bankrupt can apply for relief from it but in others it is absolute. This automaticity of approach may be capable of justification in certain cases but relies on a belief in the truth of the proposition that the debtor, by the very fact of becoming bankrupt, is not someone in whom society can place its trust or confidence. The argument that, by becoming bankrupt, an individual businessperson must at the very least have shown poor judgement, takes no account of the risks that are an everyday part of business life and which have to be managed as well as possible. It is the nature of risk-taking that, on occasions, there is bound to be failure. For a society to be genuinely enterprising the cost of failure (and therefore the fear of failure) must not be too high.

9.3    The proposals for early discharge for the great majority of those going bankrupt would give force to the idea of bankruptcy being a means of ready rehabilitation whilst those relating to exempt property would directly encourage responsible risk-taking. The targeting of restrictions now applying indiscriminately should offer the commercial world more effective protection from the irresponsible and the proposals regarding Individual Voluntary Arrangements should ensure a better return to creditors.

9.4    Attitudes take a long time to change and the psychology of stigmatisation is unlikely to be directly susceptible to legislation. What government can do is to seek to send a signal that, in proposing changes to the personal insolvency regime, it recognises the risks inherent in a modern enterprise and credit-based economy and is concerned to provide mechanisms for dealing with financial failure which give effect to that recognition.

Questions for consultees: