Bankruptcy Debt Limit to Increase
03 February 2015
Bankruptcy changes – Currently, if someone owes you at least £750 you can bring bankruptcy proceedings. The UK government has announced that this level will increase to £5,000.
If someone owes you at least £750, and refuses or is unable to pay the debt, you can bring bankruptcy proceedings against them. After remaining unchanged for almost 30 years, the UK government has announced that the £750 limit will increase to £5,000, taking people with lower levels of debt out of the bankruptcy regime. The scope of Debt Relief Orders (DRO's), a sort of 'bankruptcy-lite' for people will low levels of debt, will be increased. Individuals with assets of no more than £1,000 and debts of up to £20,000 will be able to obtain a DRO as a less expensive and less onerous alternative to bankruptcy.
The threat of bankruptcy proceedings can be a significant incentive for reluctant debtors to pay. Businesses will need to review their credit control procedures once the change comes into effect, as it may become more difficult to recover debts of between £750 and £5,000.
The changes are expected to be introduced in England and Wales in October 2015. Legislation in the Northern Ireland Assembly will be required to bring the changes into effect in this jurisdiction.