New streamlined application process proposed for bankruptcy and compulsory winding up

Proposals to introduce a better application system for bankruptcy and company windings up, easing burdens on business whilst safeguarding debtors, were announced yesterday by Business Minister Edward Davey.

The Government wants to see a more efficient service for all concerned, saving time and money when businesses and consumers get into trouble, and delivering better outcomes for both creditors and debtors. The reforms have the potential to produce significant savings for taxpayers, running to millions of pounds by moving away from a system that is wholly court based.

Business Minister Edward Davey said:

“Courts have an important role to play in bankruptcy and winding up applications where there is a real dispute between parties. But in simpler cases where there is no real disagreement, a more streamlined route into bankruptcy is needed.

“These reforms should help to deliver better outcomes, reduce unnecessary burdens on creditors and debtors, and bring substantial savings for the taxpayer.

“It is essential that we get the detail right, particularly in relation to the level of safeguards required to ensure better results for debtors, while respecting creditors’ rights. That is why I strongly encourage all interested parties to respond to this consultation.”

The consultation entitled ‘Reform of the Process to Apply for Bankruptcy and Compulsory Winding Up Petition Reform ’ proposes that:

•    Electronic applications can be made to a specially appointed Adjudicator, with an office based at The Insolvency Service. The Adjudicator would decide the outcome of each application where there is no disagreement between the parties, and courts would focus on dealing with disputes that require a judicial settlement
•    Debtors who want to apply for bankruptcy for themselves to have the choice of submitting electronic or paper applications, and the option of making the requisite payment to enter the process by instalments
•    Creditors who are looking to instigate proceedings would first have to take all reasonable steps towards reaching a mutually satisfactory solution to the debt problem, and debtors will be encouraged to seek early, free, independent debt advice. This reflects Government’s desire that people are empowered to make the right decisions for themselves about their finances, as set out earlier in the year in the Government response to the call for evidence about personal insolvency.

Safeguards included in the proposals include:

•    the right to respond to a creditor’s application
•    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 an application

Justice Minister Jonathan Djanogly said:

“The Government is committed to delivering a modern, efficient justice system. We want to make sure the right cases are dealt with in the right ways and this means in some situations, like some debt cases, they should not need to go before the courts at all. These proposals form part of our wider work to use courts as a last rather than first resort. The outcomes of this consultation will help us consider our next steps.”

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

(Source – Insolvency Service News Release)

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