Entering bankruptcy has become “ridiculously” easy, claim insolvency
The government announced earlier this month that debtors will soon be able to
bypass the court system and apply for bankruptcies through the post or online.
Its research found in parts of the country people were waiting months to be
declared bankrupt. The changes mean debtors could file for insolvency in days.
IPs have suggested that the process was too easy and the indebted should
suffer more penalties for getting into financial difficulty.
“There is no incentive for people to pay their debts back. Bankruptcy is now
ridiculously easy,” said Neil Hickling, director of restructuring at
Melanie Giles, insolvency practitioner at
Giles, said the bankruptcy simplification could reduce the number
individual voluntary arrangements entered, a process that must be arranged via
an insolvency practitioner. In IVAs the debtor keeps their assets but enters
into an arrangement to pay back a proportion of their debt.
“Firms relying on IVAs are going to be hit,” said Giles.
The IVA process needs to be revised so that less stigma is attached to it, as
debtors generally pay back more to creditors in an IVA than those in bankruptcy.
Debtors should prove they tried to repay money and that bankruptcy was their
“The courts should vet, so that debtors can demonstrate they tried to pay,”
Giles claimed there was little or no stigma attached to bankruptcies.
Earlier this year the
Service withdrew publishing names of debtors in most journals.
One IP told Accountancy Age that political parties would not look to
make the bankruptcy process harder with an impending general election, and in
the current economic climate.
In recent years debtors have been discharged from a bankruptcy in just 12
months, with many IPs citing that often this was reduced to just nine months.
“Bankruptcy will have to come back to something a bit more sensible in the
future,” said Hickling.
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