Insolvency Service should replace courts

The Insolvency Service should be responsible for making bankruptcy orders, removing the dependence on courts, according to a recent consultation.

The consultation, titled “reforming debtor petition bankruptcy and early discharge”, looked at options on which organisation should be given responsibility for bankruptcy orders.

More than 30 organisations responded including Grant Thornton, RSM Tenon, PwC, ICAEW and the Insolvency Practitioners Association.

The majority of respondents to the consultation, which closed in February, were in favour of the Insolvency Service taking responsibility for bankruptcy orders.

However, 10% raised concerns about the ability of the government department to remain independent.

Currently the court will decide on the bankruptcy and appoint an official receiver, a member of the Insolvency Service. The official receiver is responsible for the assets of the bankrupt individual. Depending on the complexity of the case the official receiver will then either appoint an insolvency practitioner as a trustee or themselves.

Some respondents believe there are issues over independence as the Insolvency Service which will approve a bankruptcy order, take on official receiver duties, and in some cases also then appointed trustee.

A statement from consumer minister Ed Davey, who is reviewing the profession, said the responses highlight the benefits of removing the court from the bankruptcy process, where in some circumstances it is “unnecessary for a court to take a decision”.

“The Insolvency Service will be exploring with Ministry of Justice and HM Courts Services how best to realise those benefits to produce a bankruptcy system that is suitably accessible and affordable, as well as providing an efficient service for all those who need to use it.”