Debt Recovery: New Bankruptcy Limit
Earlier this year, the Government announced an increase in the minimum amount of debt for which someone owed money can force a person into bankruptcy from £750 to £5000. This will come into force at the beginning of next month, on 1st October 2015. This is the first time the limit has been raised since 1986, and is a large jump which will provide protection from bankruptcy for those with smaller debts.
At the same time, the maximum amount of debt that can be recovered via a Debt Relief Order (DRO) will increase from £15,000 to £20,000. This should allow more people each year with problem debt to enter a DRO, which is a low cost alternative to bankruptcy for those with very low assets and income.
Gillian Guy, chief executive of Citizen’s Advice, said: “Citizens Advice has called for both of these changes in order to protect people who might otherwise have been forced into losing their home, car, business or job over debts worth as little as £750. Under the new rules, creditors cannot begin bankruptcy proceedings until the amounts owed are much higher. More people will be able to make a fresh start by getting a DRO instead of having to file for bankruptcy, which is often more expensive way of dealing with debt.”
Emma Haylett, our debt recovery expert here at Gordon Dean Solicitors, says “I welcome these changes, which will help individuals with debt problems. At the same time, without the threat of bankruptcy, it may make the recovery of debts less than £5000 more difficult. My advice would be to ensure debts do not build up in the first place, but if they do, try to come to a viable solution with your debtor.”
If you need help recovering a debt, contact Emma today on 01603 767671 or via the contact form on our website.