Online system risks ‘pressurised’ and ‘malicious’ bankruptcies, warns insolvency trade body R3
A newly proposed system allowing people to apply for bankruptcy online creates a number of serious risks including impulsive, pressurised and ‘malicious’ bankruptcies (where individuals can apply for bankruptcy in someone else’s name), warns insolvency trade body R3.
The Government is consulting over the proposed online system, whereby an individual can apply for bankruptcy with near-immediate effect. R3 is concerned that this could result in individuals applying for bankruptcy as a knee-jerk reaction to a bad day or under pressure from debt enforcers or bailiffs. Their bankruptcy could proceed even though they might not understand the procedure, may not have received any professional advice about their options, and may be better suited to a milder insolvency procedure.
R3 President Peter Sargent says, “Bankruptcy is a serious matter with dramatic consequences. It’s important that people receive proper professional advice before the process begins so they understand what it entails and are aware of the alternative options available to them. Proposed website ‘pop ups’ along the way are no substitute. Speeding up the application is a laudable aim, but there should also be a ‘cooling off’ period after submitting the application so people have a chance to reflect and even reconsider.”
The proposed system also creates scope for ‘malicious applications’ - applying for bankruptcy in someone else’s name. The Insolvency Service say they will punish anyone who is found committing this offence, but R3 wants to ensure there are sufficient safeguards to prevent it happening in the first place.
Peter Sargent says, “It would be highly distressing to find that bankruptcy proceedings are already under way against you, even though your finances are healthy and you had no intention of applying. We should be looking to prevent this kind of abuse happening by introducing appropriate checks in the system.”
Other abuses of the system could also go undetected as the role of the Court is phased out. Under the current system, judges’ experience and expertise leaves them well placed to see through unscrupulous bankruptcy applications - such as bankruptcies intended to defeat the claims of a spouse - whereas the Government officials processing online applications may lack the expertise to uncover them.
“There should be scope for the Court to use their expertise to root out abuses in the system which may go unnoticed under the new system. It’s hard to identify these intricate abuses as it is – reducing the oversight of the Court just increases the chance that they will go undiscovered and unpunished,” concludes Peter Sargent.
R3 Press Office