Bankruptcy Courts Survey 2005: A Pilot Study. Final Report January 2006

Tribe, John (2006) Bankruptcy Courts Survey 2005: A Pilot Study. Final Report January 2006. (Project Report) Kingston upon Thames, U.K : Faculty of Business and Law, Kingston University. 222 p. ISBN 1872058884


BANKRUPTCY COURTS SURVEY 2005 In March 2005 the Centre for Insolvency Law and Policy (CILP), Kingston Law School, Kingston University, received £26,600 research funding to undertake two pilot studies. The funding was provided by the Insolvency Service, an executive agency of the Department of Trade and Industry. The first project, which was originally due to report in November 2005, is entitled the Bankruptcy Courts Survey 2005 (BCS 2005). It now reports in January 2006, to take into account the continued flow of questionnaire responses coming in to CILP. The project as proposed originally consisted of a pilot study questionnaire of three bankruptcy courts in England and Wales (Birmingham, Croydon, and Reading). This number was however expanded during the course of the research to include three further courts (Cardiff, Exeter, and Newcastle). This expansion was deemed necessary so as to gain a greater number of responses to the questionnaire thus giving greater statistical validity to the results. The BCS 2005 project received £12,000 of the research funding. Project Two, which will report in March 2006, received the remaining £14,600. This project is an examination of the concept of phoenixism in insolvency and is being conducted by Fiona Tolmie, director of CILP. REPORT SUMMARY The Main Conclusions of the Bankruptcy Court Survey 2005 (BCS 2005) are: Debtor associated: - The main cause of bankruptcy is bankrupt acknowledged credit misuse, followed by business failure. - Males are the majority users of the bankruptcy regime. - There is no definitive age range for the typical bankrupt. - Debtors present the majority of bankruptcy petitions. - The vast majority of bankrupts are not homeowners prior to bankruptcy. - Bankruptcy does not affect employment. - Knowledge of the Enterprise Act 2002 provisions and their effects is low amongst bankrupts. - The majority of bankrupts feel morally at fault for their debt problems. - A large majority of bankrupts did not know what level of indebtedness they were being released from. Creditor associated: - Bankrupts experience immense difficulties in obtaining bank accounts post discharge, which inhibits them from rehabilitation into the credit world. - The non-monetary effects of bankruptcy are voluminous, but primarily feature dissatisfaction with lenders. Procedure associated: - Informal voluntary arrangements and individual voluntary arrangements are close second choice solutions for over-indebted individuals. - Alternative routes to bankruptcy are explored prior to the bankruptcy route being pursued. - Word of mouth and voluntary sector advice are the main information conduits for personal insolvency advice. - Bankruptcy as an experience is overwhelmingly perceived as negative and stigmatising by bankrupts. - Bankrupts sum up the bankruptcy process as being ultimately an efficient system. - The one year maximum period before automatic discharge is deemed sufficient by bankrupts. Profession/Advice associated: - Communication and advice from Trustees in Bankruptcy is good according to bankrupts. - Communication and advice from the Official Receiver is overwhelmingly good according to bankrupts. - Bankruptcy jurisdiction within the County Courts is efficient and the supporting infrastructure is well maintained. - On the whole lawyers are not involved in the bankruptcy process in terms of advice; the Citizens Advice Bureau is the main provider of personal insolvency advice. Pilot Study Preliminary Recommendations The main recommendations of the BCS 2005 are: - Consider the division of bankruptcy into a two-tier system differentiating between entrepreneurially derived debt and consumer derived debt, perhaps under the headings of "business bankruptcy" and "personal bankruptcy". - Formulate and enact a system of debtor and creditor education. - In light of the recent dramatic growth in consumer debt levels reappraise the conduct of consumer debtors, but in particular lending institutions, focusing on the creditor's responsibility and conduct regarding the consumer debtor's personal over-indebtedness. - Whilst considering the division of the bankruptcy procedure between "business bankruptcy" and "personal bankruptcy" also consider eradicating the term "bankruptcy" for non-culpable consumer debt cases. - It is further recommended that the BCS 2005 pilot study be expanded from its 6 court sample to a full study that encompasses 30 of the 136 bankruptcy courts in England and Wales to give a better impression of the treatment and experience of the bankruptcy court user.

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