The Insolvency Service announces limit changes to Bankruptcies and DRO’s
It has been reported in various Insolvency News outlets this month that from October 2015 The Insolvency Service is hoping that both the Bankruptcy petition threshold and Debt Relief Order (“DRO”) debt limits will increase. If accepted by government, the changes in limits will see the required debt amount to issue a Bankruptcy Petition rise from £750 to £5,000 and the debt level to enable a DRO to be undertaken to rise from no more than £15,000 to no more than £20,000.
Giles Frampton, President of insolvency trade body R3 said: “The rise in creditor bankruptcy petition threshold is welcome, although £5,000 is far higher than expected. It is right that the petition be increased: £750 was an entirely inappropriate level and the protection it offered debtors had been steadily eroded by inflation over the last three decades.”
My view is that the Bankruptcy petition level change is unlikely to affect many debtors looking to go into Bankruptcy as the reality is that most people do not go into Bankruptcy with debts of between £750 and £5,000 due to many preferring to informally negotiate with creditors with debts of this level. However, the changes to the DRO debt level may see a few more DRO’s than Bankruptcies.
The purpose of the changes is in part, due to the increases in fees for these processes and therefore ensures that the fees are not disproportionate to the debt levels however a number of organisations (including debt charities) were consulted with these proposed changes who have all welcomed the proposals.
Business Minister Jo Swinson said: “Struggling with unresolved debt can cause immense stress for families. These changes will ensure that our debt relief schemes are updated so that they still meet their original goal of providing access to those who need them. They also ensure that Bankruptcy, which has the most significant consequences, is reserved for those with sizeable debts.”
So it is “watch this space” in terms of Bankruptcy and DRO numbers from October 2015, let’s just hope that the changes help more individuals in debt rather than hinder them!
Also, for details about the latest changes to IP’s Fees see HERE.