Had a very rewarding morning at the BBC studios with Radio 5 Live on Tuesday 29th December.

My part on the show was billed as a 'Festive Finances Surgery', starting with debt, with; savings and pensions issues to be covered over the next few days.

Presenter Andrew Verity and I discussed several topics including student loans, the importance of budgeting touching on debt options such as debt management plans, IVAs and bankruptcy. We also went through examples of situations when not to go bankrupt, and how, in certain circumstances, if you did, you can still keep your home, if owned. 

After the show I had many calls about unsecured debts, (i.e. credit cards, personal loans, store cards and overdrafts) and by the end of the 29^th listeners had sought advice on a total of nearly half a million pounds worth of debt.

One of the text messages that came into the show was from a listener who was concerned that I was sending out the message that bankruptcy was easy and that this gives the wrong impression to the younger generation.

This was not my intent at all and I thought I made my point quite clear on the show. My  approach is that bankruptcy should be seen as a last resort, when all other options are not viable either through lack of funds to offer lenders, for example in an Individual Voluntary Arrangement (IVA) or debt management plan.

Unfortunately it is common across the industry to hear of consumers with serious financial problems being talked into long term debt repayments by debt management companies (DMPs) because this generates large fees for the adviser. In a DMP the borrower has no legal protection or debt relief (i.e. have some of the debt written off).

It was only a year or two ago that the debt industry was being criticised for not explaining the  bankruptcy procedure to people and not promoting this option, instead of putting consumers into IVAs and long term DMPs in order to generate their fees.

I have never changed my line and level of advice and always include bankruptcy as a legal option, but always leaving  it to the consumer to decide their course of action. Many debt advisers play on bankruptcy as being awkward for the person's employment status and that this could affect their credit rating in the future. When people have serious debts it is often because they took on too much credit and had no safety net to fall back on. Credit has been their downfall and they need to address the debts before thinking about any future borrowing, including applying for a mortgage.

With bankruptcy, the debtor/borrower calls the shots as it is they who decide when they wish to go bankrupt. Upon the order being granted, all the financial affairs are under the umbrella of the Official Receiver (OR) and lenders can no longer push or take legal action against the borrower. The bankrupt person is usually discharged from bankruptcy after one year but will continue to make payments to the OR, if they have the means to do so, for a period of three years.

Furthermore, if the bankrupt took on borrowing when they did not have the ability to repay, or borrowed with the sole intention of going bankrupt, then this will be picked up in the OR’s investigations and that person may well then be subject to a Bankruptcy Restriction Order (BRO) for between two and fifteen years. This basically means they will not be released from bankruptcy for that period of time.

Bankruptcy is a useful tool for over-stretched debtors/borrowers but it will also catch out those that abuse the system.

We all have to remember that the last debtors’ prison shut in 1869 but one wonders whether it is some of those who can pay their debts who are the ones having difficulty in accepting that the stigma of bankruptcy is fast disappearing and that in future a different view on bankruptcy will be taken.

You can listen to his section of the show at Radio 5 Live Finance Debt Special on the BBC iPlayer, set the timer to start 01.50.20 - end 01.53.52.

Second part of the show set timer to 02.48.16 - end 02.53.48. This will drop off the iPlayer on the 5th January 2010.