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.
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