Bankruptcy applications move online
BANKRUPTCY applications in England and Wales must be made online, rather than by applying to the court, from April 6th, the Government have said.
They say that the new digital by default system will make it easier for people to apply and - perhaps more importantly from the Government's point of view - will be cheaper to administer.
Some of these savings will be passed on to applicants in the form of reduced fees, which can be paid in instalments online.
However, anyone seeking to have someone else - whether an individual or business - declared bankrupt will still have to apply to a Court Registrar as they do now.
Those who have already submitted their forms, or who have a paper form waiting to be submitted will have until the end of business on April 5th to do so; if a case has been accepted but not heard by then it will still go through court.
Anyone who doesn't submit their paper forms to a court by the end of April 5th must start again with the new online form from April 6th instead.
Before they can apply online, however, those who wish to declare bankruptcy from that point must first create an account with the Insolvency Service via the gov.uk website.
They will then be emailed an application number, which will allow them to begin the process online.
The form has eight sections, which must be completed in chronological order. Applicants can save their progress and take as much time as necessary.
Once the form is complete, they must pay the bankruptcy fee upon submitting the form.
They will receive an email once a decision has been made, and asked to sign in to their account to find out how to progress.
Anyone concerned about the digital-only nature of the new system should be advised that the Government say applicants without access to the internet can have friends, family or debt advisers make the application on their behalf.
Alternatively, applicants lacking internet access, the digital skills, or suitable assistance can call the new Insolvency Service Enquiry Line. Between the hours of 9am and 5pm, there'll be staff available to help them complete the application via telephone.
The cost of declaring ourselves bankrupt will decrease slightly with the introduction of the online form; those who go to court for personal bankruptcy must pay an application fee of £180 - but applying online will reduce this charge to £130.
While the "debtor petition", as it's known, will be cheaper, the cost of the bankruptcy deposit will remain unchanged at £525 - bringing the total cost to £655.
Importantly though, the Government say applicants who choose to pay by card online - whether debit, credit, or prepaid - can do so in instalments, with the minimum instalment being just £5.
Defending the decision to allow applicants to pay the fee by credit card, the Government's advice states that it's easier for individuals to use a card to pay online, as well as "better facilitating third party payments from friends and families and from charities".
Meanwhile those paying by cash must pay the fee in a lump sum, at their local branch of the Royal Bank of Scotland.
What effect will this have?
The changes could have an impact on the steady decline we've seen over recent times in personal bankruptcies - the latest figures show that the number of bankruptcies has been decreasing every year since 2009, and is now at its lowest level since 1990.
Chief executive of the Insolvency Service, Sarah Albon, said that the new online bankruptcy applications would be easier to complete, and would "remove the perceived stigma of going to court, which we know stops some people from applying".
However, figures suggest that alternative debt relief measures that don't involve going to court have also been falling.
These include individual voluntary arrangements (IVAs), which are at their lowest annual total since 2008.
IVAs are payment agreements lasting five or six years made between the debtor and their creditors. After this period, any outstanding debt is written off.
Debt relief orders (DROs) are also at their lowest since they were introduced in 2009.
DROs are designed for people with low incomes or few assets to write off debts of up to £20,000.
Both IVAs and DROs are less extreme forms of debt relief in that they have fewer far-reaching consequences.
Harsher consequences, but easier to access
Nevertheless, the changes outlined above mean that these less severe remedies will be harder to access than a bankruptcy order.
For example, while applications for a DRO are carried out online, they must be done through an intermediary such as Citizens Advice.
As the National Law Review points out:
"It seems strange that debtors are required to seek advice before obtaining a debt relief order, but a debtor with a higher level of debt can simply apply online for their bankruptcy."
Those who are unsure about their options for repaying unaffordable debt may want to read our guides, linked to on the right. They may also find the Government's new interactive smart tool useful in finding the best solution for them.