On Friday 16th January the government announced several changes to insolvency procedures. Perhaps the most notable, certainly for individuals, is a significant increase in the level of debt required before a creditor can apply to the Court for a person to be made bankrupt.
Since 1986 a creditor could only petition for a debtor to be made bankrupt if they were owed more than £750. However, from October this year that figure will increase to £5,000.
Department for Business, Innovation and Skills insolvency minister Jo Swinson said ‘I believe that someone should only be put into bankruptcy by a creditor for a significant level of debt, especially taking into account that various other debt collection methods, such as county court judgments, are available.’
The impact of this rather depends on your point of view. If you are owed money then the threat of bankruptcy has long since been a useful tool to try and extract payment. While the Courts have actively discouraged bankruptcy proceedings as a tool for debt recovery, in practice that is exactly what it has been in many cases. This change will therefore be a significant blow to a creditor who is left primarily with the remedy of pursuing debts through the County Court, widely considered to be ineffective, particularly against the hardened or determined non-payer.
However, for many people who are still struggling with increased living costs; austerity cuts; wages increasing only slowly or not at all; reduced working hours or the threat of redundancy it may come as a welcome relief to find that there is now a reduced prospect of them being forced into bankruptcy by a creditor.
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