Rupert Lowe has described financially-troubled Southampton's plight as a "tragedy" with unthinkable consequences.
The future looks bleak for Saints, who are more than £30million in debt, but they have so far avoided a 10-point penalty which is automatically dished out to clubs entering administration.
Saints, who are looking for a buyer amid fears they will fold before the end of the season, believe they should avoid the deduction which has been handed to other clubs such as Leeds, Darlington, Bournemouth and Luton because the club itself is not in administration.
The Football League board met yesterday to discuss Southampton's situation, but will reconvene once they have the findings of an independent forensic accountancy report available.
"It is a very serious situation," Lowe, who returned to Saints in May 2008, told Sky News.
"For the holding company to be placed into administration itself, it's a tragedy.
"Obviously, if finance isn't forthcoming, the consequences really don't bear thinking about."
Lowe believes the responsibility for Saints' predicament must be shared by all at the club.
He added: "Everybody who has been involved in the club, whether that's the board, everybody, has to bear a little bit of the blame."
Lowe first left Southampton in acrimonious circumstances in June 2006, with supporters frustrated at the club's failure to bounce back to the Barclays Premier League.
He maintains the finances were stable when he left St Mary's Stadium and believes the big-money departures of the likes of Theo Walcott, Kenwyne Jones and Gareth Bale - all plying their trade in the Premier League with Arsenal, Sunderland and Tottenham, respectively - demonstrate the financial mis-management in his absence.
"A lot of those players were sold between 2006 and 2008 when I wasn't there, which makes it worse," said Lowe.
"That shows you how much money was wasted."
In exploiting the loophole, Southampton have left the Football League in a difficult position.
The south-coast club could take legal action if they are deducted points.
Should they escape, however, the League are likely to face a backlash from other clubs in the Coca-Cola Championship relegation battle.
Lowe maintains he will help Saints in any way possible and has not ruled out a future return.
"I wouldn't back away - if I could help I'd definitely help," he added. "Surprising as it may sound, I love the club."