Online bankruptcy could be easily abused

A recent report suggests that a new form of online bankruptcy due to be introduced by the government next year could be open to abuse, as it could lead to more people filing unnecessarily and could also lead to increased difficulties for authorities when it comes to verifying the financial details of the applicant.

The process, known as a Debt Relief Order, is due to come into play next April, and will cater for those with under £15000 worth of unsecured debt, who have less than £50 in surplus income each month and have assets of under £300.

The applicant will need to prove to officials that he or she cannot manage their debt repayments.

Applicants will be able to file online, which means that there will be no lengthy paperwork and no bankruptcy courts involved.

Once the application has gone through it will be a year before debts are discharged. Any chance in financial circumstances must be reported by the applicant, as the order can be cancelled if the applicant finds that his or her financial situation improves.

One official stated: ‘It will be difficult for the intermediary to carry out a detailed investigation into the affairs of the debtor because it just wouldn’t be worthwhile financially. Ordinarily, the trustee of a normal bankruptcy order has further powers to investigate the individual, more statutory muscle. This loophole may make it easier for people to break the law.’