Proposals to introduce a better application system for consumer bankruptcy and company windings up aimed at easing burdens on business whilst safeguarding debtors have been announced by Business Minister Edward Davey.

The reforms are designed to offer better outcomes for both debtors and creditors and save millions of pounds for taxpayers as debtors will no longer file for bankruptcy in court. Instead electronic applications would be made to a specially appointed Adjudicator, based at The Insolvency Service, who would decide the outcome of each application where there is no disagreement between the parties leaving the courts to focus on dealing with disputes that require a judicial settlement.

Debtors who want to apply for bankruptcy will have the choice of submitting electronic or paper applications and opt to pay the cost of the fees to go bankrupt by instalments, (an option suggested to the Prime Minister by DebtWizard in May 2011, and subsequently referred to The Insolvency Service. Read letter.

Creditors who are looking to instigate bankruptcy proceedings would first have to take all reasonable steps towards reaching a mutually satisfactory solution to the debt problem with debtors being encouraged to seek early, free, independent debt advice.

Safeguards included in the proposals are:

• the right for the debtor to respond to a creditor’s application for bankruptcy
• an ability to refer a dispute to the court
• the right to request a review of the Adjudicator’s decision and to appeal to the court
• a new criminal offence for submitting false information in support of a bankruptcy application

Filing on-line for bankruptcy is not new; this is what debtors have been doing when applying for Debt Relief Orders (DROs) since April 2009, going through an Adjudicator at the Insolvency Service after being assessed by an approved intermediary, usually the Citizens Advice Bureau.

I think these proposals are long overdue and they will help many consumers that have put off filing for bankruptcy through fear of having to attend a court.

Two years ago The Insolvency Service removed the requirement to advertise a bankrupt’s name, address and occupation in the local newspaper, unless the individual is uncooperative and it is necessary to gather information for the Official Receiver (OR) from the public. However this move was not undertaken to relieve fears of the neighbours finding out, but merely to help reduce the cost of going bankrupt.

The Insolvency Service will be actively engaging with interested parties throughout the 12-week consultation period. The consultation will close on 31 January 2012.

Will DebtWizard be involved? You bet he will.