Proposals to allow individuals to submit a bankruptcy application online or through the post, rather than in a court, were recently outlined by the Government.

The proposals, contained in the Consultation on Reforming Debtor Petition Bankruptcy, will make it quicker and easier for people who are overwhelmed by debts and have no means of ever fully repaying them, to seek relief through bankruptcy.

It follows earlier consultation carried out by the Government, and builds on research conducted in 2007 by The Insolvency Service and the courts, which found that in some parts of England and Wales, debtors faced delays of up to three months between first contacting the court to the making of the bankruptcy order.

The proposed changes will reduce this waiting period. Instead of having to wait for available court time, a debtor will be able to file their petition directly to a decision-maker, appointed by the Secretary of State.

These decision-makers will consider each online and postal bankruptcy petition, carrying out rigorous checks of the information to make sure the applicant meets the criteria for bankruptcy. They will then provide the applicant with a decision on their petition.

Under the proposals outlined are:

• The Government will continue to encourage debtors to seek professional advice about debt relief by using prompts and pop-ups during the online application process. There will also be a telephone support line to help people complete the application form.
• The application form will set out the serious nature of bankruptcy and the consequences that results, and applicants will have to confirm they have read and understood this.
• An applicant will be able to withdraw the application any time before a decision is made.

The change in process is expected to allow decisions to be reached within days rather than weeks or months.

The Government is also proposing to remove the discretionary ability which allows an Official Receiver to grant an early discharge from bankruptcy before the usual 12-month period.

The proposals apply only to bankruptcy petitions made by the individual in debt. Petitions brought by creditors will still have to be made to the court.

The consultation closes on 8 February 2010.

Copies of the consultation document are available on the Insolvency Service website.  Click here to view the full document.