The Insolvency Service’s Director of Policy Nick Hayward has confirmed that the Enterprise and Regulatory Reform (ERR) Bill which is due to be passed into law in 2013 will end the requirement for people to attend court in order to go Bankrupt.

Instead of going to their their local court people will be able to apply on-line. The application will then be considered and ultimately granted by an Insolvency Service adjudicator.

The question of course is why this change has been introduced and ultimately what affect will it have on individual bankruptcy applications? We consider these questions in more detail.

Why is the Bankruptcy application process going to change?

One of the main reasons for the change is of course cost. If the local District Judge is no longer required to interview the individual applying for bankruptcy this will free up valuable court time allowing more focus on issues where judicial input is more needed.

There is strong evidence to suggest that this was already happening and so the law is simply catching up with the current reality. Although you still have to go to the Court in person there has been no requirement to meet with a Judge in the Royal Courts in London for a number of years.

In addition, in more and more local County Courts a meeting with a Judge is no longer required.

BMD Tip: Under the new changes the need to attend court will disappear altogether making the process much simpler and arguably less traumatic for the individual.

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Will the change mean the cost of Bankruptcy is reduced?

If you are no longer expected to travel physically to your local court to go bankrupt this will clearly have a direct cost reducing affect as you will no longer have to pay for the journey and take time off work. However it is unlikely that the cost of the bankruptcy application itself will reduce.

On first glance this seems unreasonable given that the Court fee element is specifically a charge to cover the courts costs. Surely then, if there is no longer any need to attend the court it stands to reason that this fee should be waived.

However in reality this is unlikely to happen. It is far more likely that the Insolvency Service will maintain the current fee structure and put the court fee element towards the cost of providing the adjudicator and for course the cost of the IT system that must be built to support the change.

When are the changes to the Bankruptcy rules expected?

Although the ERR bill is expected to become law in the summer of 2013 the changes to the bankruptcy rules are not due to actually be implemented until sometime in 2015.

The reason for this delay is that the Insolvency Service needs time to implement the change. Suitable adjudicators need to be appointed and IT systems need to be built and implemented.

As such if you are currently considering using this debt solution you should not wait for the changes to be implemented. You are certainly not likely to be able to save any money by doing so.

Is the change good news if you are planning bankruptcy?

Overall the new bankruptcy rules are good news for individuals who will no longer have to fund the cost of travelling to their local court and who may have otherwise been put off the solution altogether because they were uncomfortable with having to attend their local county court.

Ultimately it seems that the change will not make the bankruptcy process any cheaper for the individual but it will be less traumatic without the need to physically attend a court building and meet with a Judge.

Of course one can argue that losing this face to face contact with a Judge is a step backward. It takes out the one last fail safe where a Judge could suggest that bankruptcy would not be in the best interests of the debtor and perhaps they should think again.

However in reality such judicial intervention is becoming less and less anyway and would eventually disappear of its own accord anyway due to costs constraints.