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Increase in bankruptcy limit: don't be caught out!

The current limit for personal bankruptcy is due to increase from £750 to £5,000 as of 1 October 2015.

This substantial increase could catch out many creditors if urgent action is not taken to issue a statutory demand before the deadline.

Below we summarise the changes and steps you can take to protect what you’re owed. 

Bankruptcy

The threshold to petition for a debtor's bankruptcy will rise in England and Wales from £750 to £5,000 as of 1 October 2015.

Currently, a creditor who is owed £750 or more may serve a statutory demand for the debt (providing it is not disputed), followed by issuing a bankruptcy petition at court, if the debt is not paid. This practice has been an effective tool used by creditors for many years.

However as of 1 October 2015, a creditor will need to issue a county court claim for debts of under £5,000. The county court will be a slower and more time consuming process. It will also be more costly.

You should therefore think carefully about whether these changes are likely to affect you and/or your business.

Do you have a debt against an individual of under £5,000?

If you do, then you should take immediate steps to serve a statutory demand before 1 October 2015 deadline and preferably by 10 September 2015 to allow the debtor 21 days in which to either settle the debt or reach an agreement. 

Winding up petitions

There are no proposals to raise the threshold of £750 for issuing winding-up petitions against companies. 

The process remains unchanged and you can still serve a statutory demand where you are owed £750 or more by a company even after 1 October 2015. 

Debt Relief Orders (DROs)

There will be new thresholds for DROs as of 1 October 2015. Individuals will be eligible for a DRO if:

  • they owe up to £20,000 (currently £15,000);  
  • they have assets worth up to £1000 (currently £300); and 
  • they have a maximum monthly surplus income of £50 (no change).

There will be no change to:

  • the 12 month discharge period for DROs;
  • the application fee of £90; and
  • the types of property that are excluded when valuing a debtor's assets for the purposes of a DRO.

If you’d like some more guidance then please contact Joanne Gardner-Boyes, associate in TLT's Commercial Dispute Resolution team on +44 (0)333 006 0485 or joanne.gardner-boyes@TLTsolicitors.com.

Contributor: Shelley Bishop

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at August 2015. Specific advice should be sought for specific cases. For more information see our terms & conditions on www.TLTsolicitors.com


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