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Debt relief: the risks of online bankruptcy applications

13/04/2010

Under a proposed new system, people could be able to tackle their debts by applying for bankruptcy online - but there are risks, says R3, the trade body for Insolvency Professionals.

The system, R3`s press release spells out, would come with a number of serious risks, such as "impulsive, pressurised and `malicious` bankruptcies (where individuals can apply for bankruptcy in someone else`s name)".

R3 expresses the concern that people with debts could end up applying for bankruptcy without giving it enough thought and/or finding out enough about the consequences of bankruptcy - and the alternatives (such as an IVA (Individual Voluntary Arrangement)) which could be a better solution to their debt problems.

They could even do it as a `knee-jerk` reaction - after a bad day, for example, or because they`ve been under pressure from bailiffs or debt enforcers.

Peter Sargent, R3`s President, stressed that although speeding up the application process is a good idea, bankruptcy is "a serious matter with dramatic consequences", and that anyone considering it should get the right professional advice before the process begins.

Website pop-ups along the way would be no substitute for professional advice on what`s involved and what the alternatives might be - and there should be a cooling-off period after the application has been submitted, giving people a chance to reflect on whether this really is the best way of tackling their debt problems.

Even more alarming, the new system also means we could see `malicious applications` - people applying for bankruptcy in someone else`s name.

"It would be highly distressing to find that bankruptcy proceedings are already under way against you," said Mr Sargent, "even though your finances are healthy and you had no intention of applying. We should be looking to prevent this kind of abuse happening by introducing appropriate checks in the system."

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Debt Advisers Direct offer free debt advice and a range of debt solutions, including debt management plans, debt consolidation loans and IVAs (Individual Voluntary Arrangements).

More than 4 million fear they`ll be made redundant 16/12/2010 - According to R3`s quarterly personal debt tracker, more than 4 Consumers took on more mortgage debt in July 26/08/2010 - Consumers took on £2bn more mortgage debt than they repaid Debts called in by parents 26/08/2010 - According to research, `the bank of Mum and Dad` is Teenagers `scared of debt` 19/08/2010 - Nearly two thirds of teenagers are `scared` of debt, according