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Ally Tow
Ally Tow,
SENIOR ASSOCIATE - CHARTERED LEGAL EXECUTIVE
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Creditor and debt relief order levels to be increased
30 January 2015

The Department for Business, Innovation and Skills (“BIS”) has this week announced that it will be raising the minimum level of debt required for a creditor to issue a bankruptcy petition against an individual.

Currently, a creditor can issue a petition seeking an order that an individual be made bankrupt if the sum owed is £750 or more. The bankruptcy debt limit was last reviewed in 1986 which, according to BIS, was too low. The new limit will be £5,000 and will apply to all petitions issued on or after 1 October 2015.

At the same time, BIS have confirmed that the eligibility criteria for a debt relief order (“DRO”) will change by increasing the maximum debt level as well as the asset limit level.

A DRO is a way for individual debtors with little or no income or assets to obtain release from their indebtedness. The order affords the debtor a year’s protection from creditors taking steps to enforce their debt against the debtor. At the end of the year, the debtor will then secure a full release from his debts. Unlike bankruptcy, a DRO does not provide for any realisation of assets nor any distribution of those assets to creditors.

The financial requirements which a debtor must meet in order to apply for a DRO are:

  • Have an inability to pay their debts (which must not total more than £15,000);
  • Have assets of less than £300; and
  • Have a disposable monthly income of no more than £50

From October the maximum debt level will increase to £20,000 with the assets level increasing to £1,000. The monthly disposable income level will remain at its current rate of £50.

For more information about the issues raised in this article or to find out more about how the Debt Recovery team can help you please contact Ally Tow  on 0118 952 7206 or email [email protected].

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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