Bankruptcy threshold is raised to £5,000 HomeBlogLegal NewsBankruptcy threshold is raised to £5,000

The government has significantly increased the threshold for creditors petitioning individual debtors from £750 to £5,000 which came into effect on 1 October 2015 i.e. the debt now has to be at least £5,000 before you can issue a bankruptcy petition.

Many welcome the move as a means of preventing ruthless creditors from bankrupting people over relatively small debts.  However, the bankruptcy petition (or threat of one) can be an effective tool for individuals and small and medium sized enterprises to recover debts from debtors who are refusing to pay what they owe.  The proposed rule change will remove the availability of this tool for the recovery of any debt lower than £5,000. The potenital problem for creditors is made more acute by the fact that this change is implemented after a significant hike in Court issue fees which was introduced in March this year, and there are now talks of proposed further increases to Court fees to come in next year.

There is a risk that, these changes combined together could have a crippling effect on the ability of individuals and SMEs to recover their debts.  Ironically, such individuals and small and medium sized enterprises could themselves be pushed into insolvency. If you haven’t already joined us in lobbying against any further proposed court fee hikes, we invite you to do so by contacting your local MP or trade/business associations you are a member of.

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