Reading back some of my old posts published in 2007, I felt that I was nut to have suggested my friends to buy the I Love Bankruptcy t-shirts as gifts.

They were funny t-shirts to me at that time, but not anymore. It’s insensitive to ask buddies to buy funny t-shirts like I Love Bankruptcy as some of them are really on the verge of filing for bankruptcy.

It’s a vast difference between year 2007 and now. Back in 2007, my buddies had steady jobs with good income and less debt. They could buy anything including certified diamonds without a blink of an eye.

Now, they are jobless with tons of debt.

The “credit crunch” which is now global is impacting a lot of people. In the U.S. it can clearly be seen in rapidly falling home values, as much as 19% of home value in some major markets, a tightening of the ability for people to get mortgages and a growing desert of unsecured credit opportunities.

In the U.K., the UK consumers have embraced consumer debt with vigor and gusto and are nearly twice as indebted as the rest of Europe. There are more and more people facing up to major financial difficulties.

When people find that they can no longer keep up with their debt repayments one possible solution is an Individual Voluntary Arrangement (IVA). IVA is an alternative to bankruptcy.

The advantage of an IVA for the debtors is that they are able to protect their assets, i.e. their homes. The advantage for the creditors is that they are often able to recoup more of the debt than they would be able to if the debtor were to declare bankruptcy, or, simply fail to pay.

Debtors entering into an IVA have their debts consolidated into a single regular monthly repayment and clear their debts in a fixed period of time Typically repayments will be made for a period of five years however there is a degree of flexibility in this.

At the end of the IVA any remaining unpaid debt is written off leaving the individual free of debt. With an IVA it is possible that as much as two thirds of the original debt will be written off.

Bankruptcy is a process where people who cannot pay their debts give up their assets and control of their finances, either by agreement or court order, in exchange for protection from legal action by their creditors.

Half the 160,000 bankrupts in the country cannot be traced by the Insolvency Department. This means they will have a good chance of getting away with their debts. Bankrupts who cannot be traced will eventually be discharged from bankruptcy.

A discharge wipes the slate clean for the debtor and leaves creditors with a debt that can never be recovered. The problem concerns mainly old cases of bankruptcy, in which identity card details were not available.

Prior to 1992, petitioners were not required to include the debtor’s IC details. So, when the bankruptcy file was handed over to the department for us to administer, it was very difficult for us to trace the bankrupt.

Debtors who still held on to the old blue IC and had not changed to the new IC were also difficult to trace, since their addresses were not updated.

Although creditors are supposed to ensure that debtors are present in court when they file a petition to have the debtor made bankrupt, in 90 per cent of cases, the debtors are not present.

A lot of times, the debtor would not know that he had been declared bankrupt until he has to fly overseas, and then gets stuck at the airport, because Immigration wouldn’t let him leave the country.

Creditors’ petitions make up 95 per cent of all bankruptcy petitions. Only five per cent of petitions are the debtor’s own petitions, whereby the debtor self-declares bankruptcy.

As a result, it becomes incumbent on the Insolvency Department to trace the debtor and serve the bankruptcy order on him to inform him of his status.

While trying to trace the bankrupts, the department will send a “First Letter” to various departments and bodies — including banks, the Immigration Department, Road Transport Department and Inland Revenue Board — to freeze all their accounts and red-flag their bankruptcy status to these departments.

However, if the Insolvency Department is still unable to trace the bankrupts, it will apply to the courts to have the bankrupt discharged, so that the department can be released from having to administer the bankrupt.