Individual insolvency – the case for a single gateway

Abstract

The history of bankruptcy law and procedure suggests that only where an independent and reliable public official has oversight of the process, can the public have confidence in it. It has long been recognised that bankruptcy, and formal means of avoiding bankruptcy, provide more stakeholder confidence where a public official is involved. As well as the interests of debtors and their creditors, there is an inherent public interest in ensuring individual insolvency mechanisms work fairly. The current bankruptcy and debt relief order procedures have the benefit of official oversight. There is no suggestion of any obvious systemic weaknesses. However, individual insolvency procedure is open to criticism in the area of individual voluntary arrangements (IVAs) where there is rarely any official involvement. This article suggests that the problems identified in the modern day IVA market might be resolved by considering the lessons learnt from nineteenth century bankruptcy law reform. A new single gateway for all individual insolvency cases, echoing the two-stage process introduced by the Bankruptcy Act 1883, is suggested where all individual insolvency processes would begin with an initial consideration of the case by a public official. This would ensure an objective assessment is made as to the best way forward for debtors and their creditors. It would encourage transparency and honest dealing.