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Government increases threshold for bankruptcy petitions

Posted by Lotty Reeves on 22nd January 2015

Last week, the Business Minister Jo Swinson, announced that the Government is increasing the minimum level of debt for which someone owed money can force a person into bankruptcy from £750 to £5000. The limits were last revised in 1986.

The changes come against a background of falling insolvency numbers since 2010.

The Business Minister also announced changes that are forecast to allow approximately 3600 more people each year with problem debt to enter into a Debt Relief Order (DRO) – a low cost alternative to bankruptcy for those with very low assets and income and debt which they are unable to pay.

The maximum amount of debt that can be covered by these plans will increase from £15000 to £20000.

It is envisaged that the changes will not disadvantage those owed money because eligibility for a DRO will continue to be restricted to those with very low realisable assets and therefore no realistic ability to repay their debts.

Business Minister Jo Swinson said: “Struggling with unresolvable debt can cause immense stress for families. These changes will ensure that our debt relief schemes are updated so that they still meet their original goal of providing access to those who need them. They also ensure that bankruptcy, which has the most significant consequences, is reserved for those with sizeable debts.”

The Insolvency Service sought views from industry, debt charities, and other interested parties on the operation of DROs and bankruptcy debt threshold last year.

Giles Frampton, president of R3, the insolvency trade body, expects “the rise in the petition threshold will require creditors to look at other options for the pursuit of low value debts. While a bankruptcy petition is not always the most proportionate tool for this, it’s very important that the insolvency regime maintains a balance between protecting the interests of both debtors and creditors. How the new threshold works in practice should be monitored closely”.

The changes will be subject to Parliamentary scrutiny before coming into force in October 2015.

For further advice and guidance on bankruptcy and the realisation of assets, please contact either or

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