Reforming Debtor Petition Bankruptcy
And Early Discharge
A Response to the Insolvency Service’s Consultation Paper
The writer welcomes the IS’s proposal to remove the making of bankruptcy orders
based on debtors’ petitions from the courts and to deal with them administratively,
whilst noting that this comes very late in the day. Whilst at present the number of
debtors’ petitions continues to rise, it seems likely that they will tail off as old credit
card debts disappear and credit becomes more difficult to obtain so that many of the
delays referred to in the consultation paper may soon be a thing of the past.
It is logical that an individual should be able to become bankrupt voluntarily and as a
result of an administrative decision, given the ability of a company to go into
The proposal to abolish the current early discharge provisions is also welcomed. The
one year period remains, however, too short and the period of three years provided for
in the Insolvency Act 1986 is more appropriate for the following reasons:
(a) it often takes some months before the OR appoints a trustee and even longer
before papers are handed over to the trustee;
(b) the trustee needs some time to investigate; 2-3 months (which is often all he
gets after handover) is insufficient and leads to points being overlooked or the
making of unnecessary and/or late applications to the court (e.g. to suspend
the discharge period);
(c) one year is insufficient to mark the seriousness of bankruptcy; three years is
(d) whilst no direct connexion can be established between the low discharge
threshold now obtaining and a relaxed view of bankruptcy, anecdotal evidence
suggests it has contributed to an erosion of the sense of obligation;
(e) there is no evidence the writer has seen that the reduction in the discharge
period has promoted “enterprise” in any way whatsoever: few bankrupts rush
to set up a new business, and even if they seek to do so it is rare that
cash/loans/finance are available to help them to do so.
Answers to questions put
Answers to the questions posed in the consultation paper follow together with some
points which have not been raised by the questions.
It is essential that the whole of this paper be read and not simply the answers to
the questions which themselves need to be read in the context of this response as
1. What skills and experience do you think it is appropriate that a Decision Maker
should have in order to make bankruptcy orders administratively?
The skills and experience are necessarily those which a bankruptcy registrar or district
judge exercises in relation to debtors’ petitions. Although the decision is largely
administrative, it remains of a judicial quality. It requires objectivity and some legal
knowledge (see below, especially as regards jurisdiction). It follows that the person
making any decision will have to have some training and should therefore be a
member of the OR’s office or otherwise have an insolvency or similar qualification.
The job should not be capable of being sub-contracted to outsiders.
It is suggested that any initial appointments spend at least one day with a judge with
experience of dealing with debtors’ petitions.
2. Should the Decision Maker role sit within The Insolvency Service or
Within the Insolvency Service. See above. This is not work that should be farmed out
to sub-contractors of some kind. Whilst it is largely administrative it remains a serious
3. What links should there be between the Decision Maker and other bodies?
The decision maker should be part of the Insolvency Service but remain separate from
its other functions so as to avoid conflicts of interest of the kind discussed in the
paper. There should be no link with any outside bodies.
4. Would a requirement on debtor applicants, to confirm both that the consequences
of bankruptcy have been read and understood and that they still want to submit the
application, be sufficient to ensure that those who apply for their own bankruptcy
appreciate the seriousness of taking this step?
5. Would information about other debt relief mechanisms, provided as part of the
application process, be enough to ensure that debtors have sufficient opportunity to
consider whether opting for bankruptcy is the right decision for them?
Yes. It is important to confine the role to the provision of information. No pressure
should be applied to a debtor to seek an alternative to bankruptcy if he wishes to apply
for bankruptcy. There is danger of conflict between a quasi-judicial and advisory role
which is not easily resolved. The ultimate decision must be that of the debtor and no
6. Should debtors be encouraged to consider alternative debt resolution procedures
before submitting an application for bankruptcy?
No. See answer to 5 above. Information should be provided, but no more. It would be
all too easy for “encouragement” to shade into pressure of an improper kind which
could undermine the objectivity of the decision maker.
7. Is there a need for the Decision Maker to be given power to direct someone into an
alternative debt relief mechanism?
This would not generally be appropriate in circumstances in which the debtor has
already had advice and confirmed that fact, although there may be very exceptional
cases that indicate otherwise. Almost no use was made by the courts of the procedure
envisaged by ss. 273-274 Insolvency Act 1986. (It was used once in the Royal Courts
of Justice by Mr Registrar Scott over 13 years ago and proved to be a waste of time.
That is likely to be the more so these days when debtors are generally much better
informed than they used to be.)
It would be inappropriate (and probably impractical) to use the impersonal procedure
envisaged by the consultation to embark on considering in depth alternatives to
bankruptcy. Such considerations are best undertaken in a face to face meeting with the
debtor (in effect a hearing) and are unlikely to be capable of replication (although
possibly a telephone “hearing” could be arranged).
8. Should there be any exemptions or remissions of the application fee?
Plainly the answer is yes. To exclude the possibility of fee remission would be to
disadvantage the poorest and most vulnerable. It would be sad if a process that was
supposed to be friendlier and more efficient (and presumably therefore cheaper) than
going to court ended up in effect as something more expensive. Arguably the whole
process should be funded by the deposit such that no fee was required.
The removal of fee remission would have a negative impact on the avowed aim of
providing access to justice.
9. If yes, how would you suggest that the cost of any fees forgone could be met in
order to keep the application process self-financing?
I do not accept the premise that the process should be self-funding. See 8 above.
10. Do you think that there should be differential pricing of a bankruptcy application,
according to whether it is made electronically or on paper?
No This fools no one. The “discount” is no such thing: in practice an excess fee is to
be applied to those who do not fall into line by submitting their papers on line.
It ought to be fundamental that access to justice is not posited on access to a
The provision is also likely to discriminate against the poor and ethnic minorities who
often need assistance over a period of time in completing the paper.
11. Should there be a facility to enable debtors to make their bankruptcy applications
on paper forms?
Yes, of course. The very fact that the question has been asked is depressing.
12. Should there be a facility to enable payment to be made on line at the same time
as the application form is submitted?
Yes. Orders may at times need to be made quickly. See the remarks on timing below.
13. Is a maximum of 10 days an appropriate period of time to allow between receipt
of acknowledgement of the application and payment of the fee that covers both the
cost of administering the application and the deposit?
No. Payment should be made at the time the order is sought. Again see remarks on
14. If you have answered “no” to the previous question, what period do you consider
appropriate and why?
The payment of any fee/deposit should be made at the same time as the application.
Again see the remarks on timing below.
15. Should the application form automatically expire if payment is not made within a
specified period of time?
16. Have we suggested any powers for the Decision Maker that you think are
unnecessary? If so, which powers and why might they be unnecessary?
The powers should be restricted to those identified on page 24, subject to the
additional power to review the decision maker’s own order (but as to that see the
The power to request further information should be restricted to information required
only for the purpose of making an order. It should not be used to conduct wide-
ranging inquiries about the debtor’s affairs of the kind that would only be made after
the making of an order. There is a danger that a decision maker could confuse the two
roles. For that reason the scope of his powers of inquiry should be restricted.
17. Are there any additional powers that the Decision Maker should have? If so, what
powers and why do you think these are necessary?
Yes. Provision should be made to transfer a petition for hearing to the appropriate
court where, for example, difficult questions (e.g. as to jurisdiction) arise.
18. Within what set period of time should a debtor be required to provide further
information, after which time the application will be deemed withdrawn? Please
provide reasons for your choice.
There should be no deemed withdrawal (cf. s. 266(2) Insolvency Act 1986). There is
no set time limit which should apply since any time limit may depend on a wide range
of circumstances. Failure to respond to requests for information could simply result in
the petition being nominally listed for dismissal.
19. Should the Decision Maker have a general power to stay a bankruptcy
application? If yes, would you please explain your reasons and outline the
circumstances in which you think such a power would be useful.
No. this is a decision of a judicial nature. It is also one which should only be made
where the relevant OR dealing with the administration can be heard. To conflate the
roles would result in precisely the conflict of interest between the decision maker and
the OR discussed in and recognised by the consultation paper. A decision maker
employed by the Insolvency Service could not possibly be seen to be objective in
making such a decision.
20. Should the Decision Maker have the power to appoint a trustee? If yes, would you
please explain your reasons and outline the circumstances in which you think such a
power would be useful.
No. This should remain a matter for the creditors or the Secretary of State (effectively
the OR dealing with the administration. If the power to appoint were to be given many
safeguards would have to be built in to cater for the legitimate interests of creditors.
Clearly again there is scope for conflicts of interest.
21. Do you think that assets may be at risk in the period between a bankruptcy
application being accepted and a bankruptcy order being made?
Plainly yes, unless the process is dealt with rapidly or some provision is made as to
what constitutes the date of presentation of the petition for the purpose of s. 284
Insolvency Act 1986.
22. In order to ensure that assets at risk are protected, should the Decision Maker have
the power to appoint an interim receiver in the period between a bankruptcy
application being accepted and a bankruptcy order being made?
Under no circumstances. The appointment of an interim receiver (generally made ex
parte with all the complications and considerations which that entails) is tantamount
to granting an injunction and should only be done by a court. Again, the problem of
conflict of interest arises where the decision maker is part of the Insolvency Service,
so such an appointment could never be seen to be objective.
This is precisely the kind of matter that should be referred to the courts; in fact a
specific application supported by the fullest evidence would be required.
Furthermore, applications to appoint an interim receiver are rare even in the case of
creditors’ petitions. The writer has never known an application to have been made in
relation to a debtor’s petition. Whilst a sate of affairs might arise such as to make an
appointment possible, it is hard to envisage.
23. If you have answered “no” to the previous question, can you describe a better way
of ensuring that such assets are protected?
The question misses the point.
There is s. 284, and there is the possibility of applying for an injunction or the
appointment of an interim receiver; but the latter remedies are draconian and are only
appropriate for a judicial decision.
24. Do you agree with the duties we have outlined for the Decision Maker?
Broadly, yes, but this answer must be read in the context of the answers given above
(especially regarding timing and information) and the general points made below.
25. Have we suggested any duties that you consider are unnecessary? If so, which
ones and why?
26. Are there any other duties the Decision Maker should have? If so, what are they
and why do you think they are necessary?
The duty to consider referring a petition to the court where it raises difficult issues
(e.g. as to jurisdiction).
27. Do you think that two working days, from when an application is deemed to have
been submitted, is an appropriate period of time within which to require the Decision
Maker to make a decision?
It is probably fair enough, although ideally the order ought to be made on the same
day on which the papers are submitted in satisfactory form. This has always been the
practice at the RCJ. It should be borne in mind that there are debtors who leave things
until the last minute and need urgent protection from creditors. This is especially
relevant where, for example, a creditor is seeking to make a charging order absolute
or to levy execution.
28. Do you think that the two working days within which the Decision Maker is
required to make a decision should be stayed if the Decision Maker stays his or her
consideration of a bankruptcy application pending receipt of further information
Generally speaking no, unless the information is seriously deficient.
29. Should failure to respond to a request for further information be treated as the
application being withdrawn by the debtor?
No. See s. 266(2) and the points about information and timing made above and below.
30. Would 14 days be sufficient time to give to the debtor to ask the Decision Maker
to review his/her decision? If not, why? How long do you think it should be?
No. 21 days would be more appropriate (cf. appeals). However, the question of
review raises important considerations dealt with below.
31. Do you think that early discharge should be repealed?
Yes. Indeed the 3 year period should be restored for the reasons set out in the
introduction to this response.
32. If you do not think that early discharge should be repealed, what specific benefit
do you think there is in keeping early discharge? Please provide figures if you can.
Other points arising
It is essential that a bankruptcy order is made as soon as possible once a petition has
been presented in proper form. Two days is a considerable improvement on the
service which many county courts have provided but is less than that which has
obtained at the RCJ where orders are generally made at present on the same day as
Consideration might usefully be given to allow petitions still to be presented to the
court where there is real urgency, as there sometimes is, even if it has been caused by
the debtor’s own delay.
The EC Regulation on Insolvency Proceedings and other jurisdictional issues
The consultation paper proceeds largely if not wholly on the basis that debtors’
petitions may only be presented in the country where the debtor has his centre of main
interest. It would seem, however, that there may be circumstances in which a debtor
could present his petition based on having an establishment in this country.
This, together with other jurisdictional issues which arise under s. 265 Insolvency Act
1986 make it essential to preserve some mechanism for referring difficult cases to a
court where a decision is required that is more than administrative. This consideration
applies not only in relation to the EC Regulation but generally where the debtor is not
located in a member state.
There is an additional consideration which arises out of the EC Regulation. Will the
foreign courts recognise a decision made administratively? If not a procedure may be
required analogous to that for confirmation by the court of a creditors voluntary
The paper envisages adopting the general law on appeals. Consideration needs to be
given to whether permission to appeal should be required. It is suggested that the
requirement should not apply to an administrative decision in the same way that it
does to a judicial decision. The giving or refusal of permission to appeal is a real
judicial decision involving consideration of legal points which are likely to be beyond
the scope and experience of an unqualified decision maker and the exercise of a
discretion that is essentially judicial in character.
Similar considerations apply to the question of review.
There is no time limit applicable to s. 375(1) Insolvency Act 1986. Query, therefore,
why a particular time limit should now be imposed in relation to one jurisdiction.
Furthermore, the legal considerations applicable to the exercise of the discretionary
jurisdiction are complex (see, for example, Papanicola v Humphreys  EWHC
335 (Ch),  2 All ER 418). It is not a jurisdiction which should be exercised
other than judicially, save, perhaps, in a very simple case. The problem lies, however,
in defining what is a simple case.
In the circumstances the jurisdiction should be exercised only by court and should not
be subject to an arbitrary time limit.
It is presumed that this is a title adopted only for consultation purposes and that a
more appropriate and felicitous title will be found in due course!
It is pleasing that there is to be no specific requirement for the production of evidence
of identity as a prerequisite to seeking relief. There is, as the paper notes (pages 11
and 13), no evidence at all of the malicious use of debtors’ bankruptcy petitions. It
must be hoped that in the circumstances no identity will be required any more than it
is in any other litigation. This gives rise to the question what is meant by “if
information in the application fails to pass checks”? What checks are envisaged
beyond a check to ascertain that the requisite information has been provided?
The fact that an application for a bankruptcy order would in future give rise to an
administrative rather than a judicial process should not mean that different criteria are
brought to bear than those applicable in a judicial legal process. It is a long
established principle of law that a statement made on oath (or its equivalent in a
witness statement) should be accepted as prima facie evidence unless manifestly
untrue or properly challenged (see, for example, Shierson v Vlieland Boddy 
EWHC Civ 974,  1 WLR 3966 and Long v Farrer & Co  EWHC 1774
(Ch),  BPIR 1218 (Ch)).
Chief Bankruptcy Registrar
Royal Courts of Justice
London WC2A 2LL
20 November 2006