Accountancy Newsletter September 2015
DAC Beachcroft's Accountancy newsletter features topical news and insights for our clients and contacts.
Published 9 September 2015
These will shortly be made by Debtors online. We comment further on the change below, but we note that it is consistent with the Government's approach on a number of fronts to cut the taxpayer's bill for court costs.
The Insolvency Service has confirmed in the summer edition of its quarterly newsletter that applications for bankruptcy orders by debtors (as distinct to creditors) will be moving from the Courts to an online portal run by the Insolvency Service with effect from April 2016.
A debtor's application for bankruptcy will be made to an adjudicator. The debtor must include particulars of his creditors, debts and other liabilities and assets. Once the application is made, it cannot be withdrawn. The adjudicator will not have a discretion as to whether to make a bankruptcy order. If the procedural requirements are met then the bankruptcy order must be made. A debtor will, however, have a right of appeal to the Court if a bankruptcy order isn't made.
The change to the process will be introduced by amendments to the Insolvency Act 1986 and corresponding rule changes to the Insolvency Rules 1986.
The objective behind the change is policy driven: to focus courts on resolving disputes requiring judicial settlement rather than rubber-stamping formalities prescribed by the insolvency legislation.
Whilst the policy motive is welcomed, there is a concern that if the bankruptcy process is made too easy, that debtors may declare themselves bankrupt in circumstances where under the existing regime they may first have sought professional advice and explored other options.
As from 1 October 2015, the minimum threshold to petition for an individual's bankruptcy will increase from £750 to £5,000. R3 (the trade body for Insolvency Professionals) has campaigned for a number of years for an increase in the bankruptcy threshold, citing the need for a rebalancing of the relationship between debtors and creditors. The current threshold of £750 was set in 1986 but it was not until 2011 that the Government recognised that a threat of bankruptcy in circumstances where the debt is only £750 is disproportionate. It has taken 4 years for that concern to be addressed.
With the number of number of people becoming bankrupt at the lowest level for some years, it is likely that the number will drop further following the introduction of this change.