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Insolvency Service clamps down on bankrupt gamblers and speculators

Mike Finch

The Insolvency Service is clamping down on individuals who have become bankrupt as a result of ‘gambling, speculation or unnecessary extravagance’.

The number of Bankruptcy Restriction Orders filed against individuals for ‘gambling, speculation or unnecessary extravagance’ has increased three years in a row. The number has increased 150%* in the last two years alone, up from 16 in 2014/15 to 40 in 2016/17 (see graph below).

Bankruptcy Restriction Orders (BROs) can have a dramatic impact on individuals. BROs limit an individual’s access to credit and can prevent them from becoming a director of a company for up to 15 years, effectively ruling them out from leading future business ventures for as long as the order lasts.

This clamp down comes as the number of people who regularly gamble in the UK increases. A report from the Gambling Commission earlier this year revealed that 48% of people gambled at least once a month in 2016, up from 45% in 2015. This increase has been driven by the growth of the online gambling sector which has made gambling more accessible.

BROs can be issued for a number of other reasons, including; deliberately paying off some creditors in preference to others, fraud, and failing to disclose assets (see box below).

Some recent examples of individuals being issued with BROs include a man who ran a failed £8.5m spread-betting scheme without FCA authorisation. The High Court ordered him to pay £7m to the FCA to distribute to investors. He failed to do this and was declared bankrupt.

Last year, a former top ten global snooker player was issued with a BRO for borrowing hundreds of thousands of pounds from friends and acquaintances which he knew he couldn’t pay back. He subsequently spent the money on gambling which resulted in his bankruptcy.

It is important for anyone at risk of bankruptcy to be aware of all their obligations so they can avoid putting themselves at risk of being a target for the Insolvency Service’s law enforcement work.

Mike Finch, Restructuring & Insolvency Partner, says: “With the Insolvency Service taking such a tough stance, it is crucial individuals do not underestimate the consequences of being declared bankrupt as a result of gambling, speculating or unnecessary spending.”

“Bankruptcy Restriction Orders can have a significant impact on daily life. They not only inhibit an individual’s ability to borrow and engage in business ventures, but information about a BRO is made publicly available by the court through press notices and a register.”

“Breaking these restrictions is a criminal offence which could result in heavy fines and even a custodial sentence. Anyone unsure of what their BRO means or if they have broken any of the restrictions, should seek professional advice as soon as possible.”

The number of Bankruptcy Restriction Orders issued by the Insolvency Service has increased for the last three years in a row – number of BROs

*Insolvency Service 2017

Bankruptcy Restriction Orders (BROs) are issued when the conduct of a bankrupt person is deemed dishonest, reckless or blameworthy. BROs can restrict an individual’s access to credit and ban individuals from being directors of a limited company or from being involved in the promotion, formation or management of a company for between two and 15 years.

Grounds for issuing a bankruptcy restriction order include: deliberately paying off some creditors in preference to others, gambling or making rash speculations, being unreasonably extravagant, failing to produce appropriate records, fraud, failing to disclose assets, neglecting the affairs of the business, and failing to supply goods or services that have been paid for.