The TSP Civil and Commercial Dispute Resolution team, discusses how the increase to the thresholds of bankruptcy and debt relief orders are likely to affect those considering litigation to recover unpaid debts from individuals.
The Department for Business, Innovation and Skills has confirmed that from 1 October 2015 the minimum level of debt for which a person who is owed money can force another person into bankruptcy will be increased from £750 to £5,000.
In addition, the criteria for debt relief orders (DROs) will be changed, with the maximum debt level rising from £15,000 to £20,000 and the asset limit from £300 to £1,000.
In a consultation begun in August 2014, the Insolvency Service (IS) obtained views from industry, debt charities and other interested parties on the operation of DROs and bankruptcy debt threshold. The document published at the end of the consultation suggested the bankruptcy debt threshold (which was last revised in 1986) was set too low. However, the new bankruptcy figure is higher than the industry was expecting, as it was thought the figure would be around £2,000. In response, the IS has stated that the new monetary limits reflect the cost of living today and corresponding debt.
The increase to the thresholds may reduce the number of bankruptcies in future but this may mean that creditors (where possible) consider the financial position of debtors before issuing proceedings or embarking on enforcement action (such as execution against goods and charging orders) to recover their debts.
For more information on how the TSP Dispute Resolution team can help with your dispute, whether you are an individual or a business, contact them here.