Bankruptcy Levels Expected to Increase from October 2015
Earlier this year the government announced proposed changes to the threshold of debt by increasing the amount needed for a creditor to apply for bankruptcy petition. The Insolvency Service (IS) has proposed that from 1st October 2015, the creditor would need to be owed at least £5,000 which is a huge increase from the current £750 limit. This amendment represents the first increase since 1986.
This is not welcome news to many creditors as the increase may result in smaller debts being harder to recover, forcing creditors to issue more claims through the Small Claims Court which can often be a lengthy process and not always cost effective. The other option is to arrange repayments directly with the debtor prolonging the payment of monies owned. For the debtor, the change reduces the chance of bankruptcy over small debts during times of financial difficulty.
The proposed changes also include amendments to the Debt Relief Order (DRO). Those with debts of no more than £20,000 and whose assets are of no more than £1,000 plus a vehicle worth no more than £1,000, will be able to enter a DRO regime which is a low cost alternative to bankruptcy. This option was previously only available to those with less than £300 in assets who owed a maximum of £15,000. Unlike bankruptcy a DRO is an administrative rather than a court based procedure.
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