Bankruptcy Reform Eliminates Court Process

Under one of the amendments to the Enterprise and Regulatory Reform Bill published earlier this month, individuals wishing to apply for their own bankruptcy will be able do so directly to a new adjudicator without going through a court process.

The Department for Business, Innovation and Skills (BIS) said that this is one of a several measures designed to cut red tape and should free up court resources and be cheaper to administrate than the current system.

The bankruptcy simplification amendment will remove the court procedure from the process when it is not needed. According to the BIS, going directly to an adjudicator rather than through the court is designed to save time and money for individuals, government and businesses.

A Government consultation that started last year looked at proposals to remove both debtor and creditor petitions for bankruptcy, and most company winding-up petitions, from the courts.

The result of the consultation revealed that there was little support for reform to the creditor bankruptcy or company petition process and the majority of the 70 respondents were strongly against the idea of removing the courts from elements of the creditor petition process.

Respondents also voiced their concerns about the role and qualifications of the adjudicator and the need for a judge to determine third party applications.

The Bill went through its report stage and third reading in the House of Commons last week and will now transfer to the House of Lords. Subject to Parliamentary approval, the Bill will introduce a significant range of measures that will help support growth and reduce the burden of regulation on businesses through the Primary Authority scheme.

Tim Close is an accountant specialising in business insolvency, debt recovery and business rescue.

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