In recent years there has been an increase in the number of debtor petition bankruptcies and the resulting pressure on court resources has led to significant delays for debtors seeking to access much needed debt relief and delays for other civil court users.

In 2006, as part of the Government’s strategy for managing indebtedness and increasing efficiency and following a request made by Her Majesty’s Court Service (HMCS), The Insolvency Service (IS) carried out a review to look at the bankruptcy process.

Under the current system, debtors must attend at their local bankruptcy court in order to petition for their own bankruptcy. Whilst the required documents can be obtained and completed on-line, in all cases the debtor must attend court in order to file the papers. The requirement to attend court personally means that, in some areas of the country, debtors must travel considerable distances in order to file their petition.

The study looked at the effect of removing the courts from the debtor petition process and allowing the Official Receiver to make the bankruptcy order administratively, thus releasing court resources to deal with those aspects of the bankruptcy process that require judicial involvement.

There followed a consultation process ‘Bankruptcy: proposals for reform of the debtor petition process’, setting out recommendations for reform and inviting views on the IS’s proposals.

The main points raised by those that responded to the consultation were:

• A removal of the courts from the order making process would offer greater efficiencies, with postal submissions to be a suitable alternative to online applications.
• The need for the debtor personally to attend the making of the order although not necessarily in a court.
• Leaflets and advice booklets were not necessarily sufficient, and careful consideration as to how best to ensure debtors would be fully informed, especially if, face-to-face contact with experienced court and Insolvency Service staff were limited.
• The issue of cost of entry into bankruptcy, in particular the deposit and the proposed administration fee was seen by some as a barrier to entry.

Another survey carried out more recently on behalf of the IS, due to report about now, is examining the issue of concessionary fees and how the present system effects users.

Debtwizard comment

Whilst the average waiting time is between 1 and 2 months, some debtors can face a wait of up to 3 months before their bankruptcy order is made, the stigma surrounding bankruptcy is mainly due to the need to attend at court and the advertisement of the bankruptcy order.

As a result of this consultation it is likely that under new proposals some of the problems associated with the present system would be alleviated by removing the courts from the debtor petition process. Debtors will be able to choose either to electronically submit their petitions via an online service or to submit their petitions via post, therefore removing the requirement of attendance at court and the access and costs issues associated with travel to court. However the advertisement of the bankruptcy is likely to continue.

The bottom line seems to be that changes to the current system for petitioning for bankruptcy will come about sooner or later. However it also seems clear that whilst these changes may go some way to creating a more effective process and help in removing some of the stigma attached to going bankrupt there doesn’t seem to be much hope of the process being made any easier by reducing the current level of fee required.

Debtwizard is asking the PM to take decisive action in helping consumers that cannot afford the bankruptcy fee.

As from 6th April 2009 the Government have increased the cost to self petition for bankruptcy to £510.

You can find the letters to and from Debtwizard, the Prime Minister and the Insolvency Service here