Business owners are being warned to re-visit their terms of business as the law changes, potentially making it easier for debtors to apply for bankruptcy.
From April 6, the process for declaring bankruptcy will change – it will no longer be necessary to apply to court. Instead, an application will need to be filled in online at a website run by the Insolvency Service.
In addition, there will be a reduction in the fees charged, potentially making bankruptcy more accessible and cheaper.
Suzanne Dean, debt recovery manager at Napthens solicitors, reveals that the change in the law is designed to allow courts to focus on complex disputes, with simpler applications dealt with faster.
However, she warns that businesses dealing with consumers, individuals or unincorporated businesses should alter their practices and review their terms of business.
She said: “It will become even more important to do research and due diligence on customers and have retention of title clauses for goods supplied written into contracts and terms.
“There is concern that these changes make the bankruptcy process too easy, and debtors may declare themselves bankrupt, in circumstances where, under the existing legal regime, they may first have sought advice and explored other options.
“A bankruptcy may leave creditors in a difficult situation, and unable to obtain the money they are owed. Some simple checks can often help to prevent this situation from arising.”