PROPOSALS to allow people to apply for bankruptcy online brings serious risks, says an insolvency expert.
The Government is consulting over the proposed system which would allow people to apply for bankruptcy with near-immediate effect.
But Charles Brook, Huddersfield spokesman for insolvency trade body R3, said it could result in people applying for bankruptcy as a “knee-jerk reaction” to financial problems or pressure from debt enforcers or bailiffs.
He warned: “Their bankruptcy could proceed even though they might not understand the procedure, may not have received professional advice about their options and may be better suited to a milder insolvency procedure.”
Mr Brook, a director of corporate recovery firm Begbies Traynor, said: “Bankruptcy is a serious matter with dramatic consequences.
“It’s important that people receive proper professional advice before the process begins so they understand what it entails and are aware of the alternative options available to them.
“Speeding up the application is a laudable aim, but there should also be a ‘cooling off’ period after submitting the application so people have a chance to reflect and even reconsider.”
Mr Brook said the proposed system also created scope for “malicious applications” – applying for bankruptcy in someone else’s name.
The Insolvency Service says it will punish anyone found committing this offence, but R3 wants to ensure there are sufficient safeguards to prevent it happening in the first place.
Mr Brook said other abuses of the system could also go undetected as the role of the court is phased out.
Under the current system, judges’ experience and expertise leaves them well placed to see through unscrupulous bankruptcy applications.