‘Bankruptcy Light’?—The English Debt Relief Order, Bankruptcy Simplification and Legal Change

Abstract

Many over-indebted individuals have no surplus income and few assets. They constitute the “No Income: No Asset” or “Low Income: Low Asset Debtors” who may be unable to pay for access to bankruptcy in jurisdictions which require individuals to pay for access. The World Bank has identified this group as a pressing international policy problem. In the US authors have called for bankruptcy simplification through a streamlined administrative procedure for this group. This article focuses on one jurisdiction’s response to this issue, the English Debt Relief Order, a low-cost, means tested, online administrative procedure introduced in 2009 to provide access to debt relief and financial inclusion for those unable to afford bankruptcy and for whom bankruptcy would be a disproportionate response. The article concludes that although the DRO process promised bankruptcy simplification, it has resulted in a more complex access procedure than bankruptcy because of the relatively restrictive means test, liability limits, and over-inclusive access controls. The costs of the process are however borne by the debt advice intermediaries who process the files rather than the Insolvency Service or debtors. The particular English approach reflects the influential role of the relevant government departments who established the agenda and framed the relevant policy options. This suggests that although the idea of bankruptcy simplification may be widely accepted internationally, any actual procedure will reflect the politics and institutional history of particular jurisdictions. The article concludes by considering the relevance of the English experience for US proposals for a simplified administrative bankruptcy and suggests a future comparative research agenda.