Online move ‘will boost bankruptcy tourism’
Moving bankruptcy functions online may make 'bankruptcy tourism' easier.
The Accountancy Age has published another interesting article. Full version follows:
Personal bankruptcies have hit record levels, causing an overwhelming burden on the judicial system.
The government has attempted to combat the problem by putting the entire bankruptcy function online - but the move could have serious implications in the fight to stop people moving to the UK merely to use advantageous insolvency rules. The practice is known as bankruptcy tourism.
Chris Nutting, personal insolvency director at KPMG, said if bankruptcy procedures move online rather than going to a court the number of bankruptcy tourists in the UK could increase “significantly”.
A European debtor can register their centre of main interests (COMI) in the UK and file their petition online, leaving insolvency practitioners to realise the assets and track them down all over Europe.
Nutting’s concerns were echoed by Louise Brittain, partner in reorganisation services at Deloitte, who believes there has to be some form of “sifting” of information to ensure the system is not abused.
Brittain believes some information should be online such as document filing but that an online-only procedure is a “step too far”.
At the time of going to press the Insolvency Service had not responded to questions on whether it had plans for further checks when debtors file online petitions for bankruptcy.
IN OUR VIEW
The judicial system is under pressure to meet the increased demand of debtors filing for bankruptcy. However it cannot solve one problem by creating another. The Insolvency Service may be able to meet demand, but at what cost? It has to be very careful to ensure the UK does not earn the reputation as the debtor paradise of the EU, as IPs spend all their time chasing small assets across the continent.