Nearly 60% believe that bankruptcy should last longer than a year, with 82% believing that debtors often take advantage of the bankruptcy system to write their debts off which they built up due to reckless spending.

Lee Manning, president of R3, said: “Our bankruptcy regime, lasting only a year, is quite lenient compared to other countries. While no-one is advocating a return to the ‘debtor’s prison’, there is a strong feeling that a debtor’s spending behaviour should be factored into the length of the term of bankruptcy.

“Perhaps fuelled by stories of celebrity debtors, there is support for a move to distinguish the genuine hardship case from the reckless spender.” 

Nearly two thirds think that bankrupts should be treated differently according to their prior spending behaviour and most could avoid bankruptcy by reining in reckless spending.

Manning continued: “Currently, the actual term of bankruptcy cannot be extended for reasons of reckless or blameworthy behaviour prior to bankruptcy. Although a Bankruptcy Restrictions Order can be imposed to extend the restrictions of bankruptcy for between 2 and 15 years for culpable behaviour, a BRO does not increase the bankruptcy term.

“This means that any assets acquired by a reckless spender after their 12 month term of bankruptcy, even where they are subject to a BRO, can be retained by that individual rather than helping towards paying back their debts. Only by extending the term of bankruptcy, not just the restrictions, can we really hope to deter reckless spending.”

This report comes at a time when over half the nation is worried about their current levels of personal debt, while 51% struggle to make it to payday each month, especially in the 35-44 age group.

This situation is also changing the attitudes of borrowers to payday loans, with 4m adults saying that they are likely to seek a payday loan in the next six months, the highest level recorded by R3.

Manning added: “Those who struggle to make ends meet, using credit cards to bridge the gap, or who are considering a payday loan, will have to make some financial sacrifices in order to avoid their debts spiralling out of control and leading to a potential bankruptcy.

“Our research also indicated a tougher bankruptcy regime would make people more cautious with their spending, although too late to address today’s consumer debt problem. In the meantime, seeking professional advice as soon as possible is the best remedy for concerns over debt.”

This follows yesterday’s announcement by mortgage provider GE Money, that it will no longer process home loan applications by borrowers who have used payday loan companies in the three months preceding the application or twice in the past year.