Consultation on the bankruptcy petition process

[Riz]

Particularly interesting to read the proposals regarding creditor petitions.

[Riz]

Re: Consultation on the bankruptcy petition process

The press release.

07 November 2011 14:31

Proposals to introduce a better application system for bankruptcy and company windings up, easing burdens on business whilst safeguarding debtors, were announced today 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.

Ends
__________________________________________________ ____________

Notes to editors


1. The public consultation on Petition Reform is set to run for 12 weeks.

2. By law, petitions for personal bankruptcy and for the compulsory winding up of companies must be made to court. Many of the petitions filed at court are not disputed at a court hearing and the majority, being debtor petitions, are made by the person who is seeking the relief.

3. The proposed reforms insofar as they relate to bankruptcy applications only extend to England and Wales. Responsibility for winding up is currently split between Holyrood and Westminster. However, the Scotland Bill, which is currently making its passage through the Westminster Parliament, would reserve all matters relating to winding up to Westminster. If the Scotland Bill is passed in its current form, it will be a matter for the Westminster Parliament and UK Government, in conjunction with the Scottish courts and appropriate stakeholders, to make decisions about how the winding up reforms might apply in Scotland. Insolvency is fully devolved to Northern Ireland, so the proposals do not apply to that jurisdiction.

4. The Insolvency Service administers the insolvency regime investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent. The Service also authorises and regulates the insolvency profession; deals with disqualification of directors in corporate failures; assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees; provides banking and investment services for bankruptcy and liquidation estate funds; and advises ministers and other government departments on insolvency law and practice. Further information about the work of The Insolvency Service is available from http://www.bis.gov.uk/insolvency