How your neighbour could bankrupt you

Proposed changes to the law would open up the opportunity for neighbours and enemies to wreck your finances forever, all with the click of a mouse.

You can do all sorts of things online, with the greatest of ease.

You can book a holiday. You can sort out your grocery shopping for the week. You can even use an online banking service to stay completely on top of your financial situation at any given moment.

However, the Government has suggested that it would be a good idea for you to now be able to file for bankruptcy online as well - a move that already has the legal profession up in arms.

Why this is being suggested

There is a certain logic to the proposed move. For a start, it would let those people with massive debts who are going to file for bankruptcy anyway do so in a more cost effective manner. Going for the DIY insolvency will cost £360, which will set you back a fair bit less than if you have to formally go through the court process - for a star,t you miss out on the £150 court fee, with additional costs taking the process well past £500.

From the Government's point of view, it will also free up the courts' resources, and reduce the delays which many people experience between presenting their bankruptcy petition and the bankruptcy order being made.

Such delays are sadly inevitable at the moment, with record numbers of people for insolvency in 2009: a whopping 134,142.

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A click of the mouse?

However, industry experts have been lining up to denounce the idea for being ill-thought out, and I find it very difficult to disagree with them.

The biggest argument against such a move is that filing for bankruptcy is a pretty major step, and it takes a fair while for your financial reputation to recover. As a result, it's the sort of move that should be discussed at length with a specialist debt adviser, somebody who knows what they are talking about and knows whether going for bankruptcy really is the best move for you in your situation.

If you can file for bankruptcy with a click of the mouse online, it opens up the risk to people going ahead with it without properly understanding the consequences, or even worse, doing so on the spur of the moment - perhaps after having a few glasses too many.

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Pray you don't have enemies!

There are also fears that such a system is open to abuse by vengeful acquaintances. If you enjoy a particularly spiky relationship with someone, theoretically they may be able to file for bankruptcy online on your behalf without you knowing about it.

The first that you would hear of it would be when your financial accounts begin freezing up.

The Government argues that as the fee of £360 is paid at the start of the process, such impulse or vengeful applications will be deterred, though I'm not convinced that's good enough really.

Is it really appropriate that something as serious as being made bankrupt - a process that makes entering certain professions exceptionally difficult, like the armed services or the police - can be performed in a box-ticking fashion online?

I'm not a fan.

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The importance of advice

If you are considering whether bankruptcy is the right move for you, I would always strongly advise you to talk to someone first.

I'm a huge advocate of the benefits of talking to experts, whether you are arranging a mortgage, sorting out an investment or just struggling with debt and in need of some help.

There are plenty of specialist debt firms who can help advise you on whether you need to pursue bankruptcy or an IVA, or whether a simple lifestyle change is required, and best of all some of them offer those services absolutely free.

A good place to start is lovemoney.com's new weekly debt blog from the Consumer Credit Counselling Service, to see if they've covered an area related to your own debt problems. If you can't find the answer there, then head over to the CCCS website and you'll be able to get your hands on all sorts of information, as well as arrange to speak to someone.

Citizens Advice should also be on your contact list, while the National Debtline and Advice UK are also terrific organisations that should be able to help.

I'm sure that the organisations that do charge a fee, in the main, offer a decent service, but I don't see why you'd pay for something that you can get for free.

I can completely understand why the Government wants to speed up the bankruptcy process - it's in no-ones interest for it to drag on. However, this idea seems terrifyingly ill-thought out and could have appalling consequences for all of us.

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