Insolvency Service
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Proposed reforms to bankruptcy procedures will help people in debt and reduce court costs.

Department for Business Innovation and Skills and the Insolvency Service

Proposals to allow individuals to submit a bankruptcy application online or through the post, rather than in a court, were outlined by the Government today (13 November.)

The proposals, contained in the ‘Consultation on Reforming Debtor Petition Bankruptcy’ will make it quicker and easier for people who are overwhelmed by debts, and have no means of ever fully repaying them, to seek relief through bankruptcy.

It follows earlier consultation carried out by the Government, and builds on research conducted in 2007 by The Insolvency Service and the courts, which found that in some parts of England and Wales, debtors faced delays of up to three months between first contacting the court to the making of the bankruptcy order.

The proposed changes will reduce this waiting period. Instead of having to wait for available court time, a debtor will be able to file their petition directly to a decision-maker, appointed by the Secretary of State.

These decision-makers will consider each online and postal bankruptcy petition, carrying out rigorous checks of the information to make sure the applicant meets the criteria for bankruptcy. They will then provide the applicant with a decision on their petition.

Minister for Business Ian Lucas said:

“Bankruptcy should be the option of last resort for those burdened with unmanageable levels of debt, and this won’t change under our proposed reforms. However, once a person has decided that it is the only viable solution for their debt problems, these proposed changes will make it easier for them to proceed into bankruptcy.

“Many people delay making a petition for bankruptcy because they do not want to appear in court – meaning they can sink further into debt. We want to reduce that delay, while also freeing up valuable court time and resources to deal with other aspects of insolvency.”

Under the proposals outlined today:

  • The Government will continue to encourage debtors to seek professional advice about debt relief by using prompts and pop-ups during the online application process. There will also be a telephone support line to help people complete the application form.
  • The application form will set out the serious nature of bankruptcy and the consequences that results, and applicants will have to confirm they have read and understood this.
  • An applicant will be able to withdraw the application any time before a decision is made.
  • The change in process is expected to allow decisions to be reached within days rather than weeks or months.
  • The Government is also proposing to remove the discretionary ability which allows an Official Receiver to grant an early discharge from bankruptcy before the usual 12-month period. 
The proposals apply only to bankruptcy petitions made by the individual in debt. Petitions brought by creditors will still have to made to the court.

The consultation closes on 8 February 2010.

Notes to editors.

1. Copies of the consultation document are available on the Insolvency Service website at www.insolvency.gov.uk

2. In October 2007, the Insolvency Service published a consultation paper, ‘Bankruptcy: proposals for reform of the debtor petition process’, setting out recommendations for reform and inviting stakeholders to share their views on those proposals.  It proposed that debtors could submit electronic application forms to The Insolvency Service and that an Official Receiver (OR) would make the order administratively. In July 2008, the Service published the summary of responses to that consultation and has worked with stakeholders since then to develop the proposals outlined today.

3.The Insolvency Service administers the insolvency regime investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent. The Service also authorises and regulates the insolvency profession; deals with disqualification of directors in corporate failures; assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees; provides banking and investment services for bankruptcy and liquidation estate funds; and advises ministers and other government departments on insolvency law and practice.

Contacts

NDS Enquiries
Phone: For enquiries please contact the above department
ndsenquiries@coi.gsi.gov.uk
 

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