As of the 1 October 2015 the minimum level of debt for which a creditor can commence Bankruptcy proceedings is to increase from £750.00 to £5,000. This change is effected by the Insolvency Act 1986 (Amendment) Order 2015. Therefore, from the 1 October 2015, creditors will be unable to serve a Statutory Demand or issue a Bankruptcy Petition against a debtor owing less than £5,000.
The Bankruptcy limits were last revised in 1986. Following a recent Government consultation, the increase has been implemented to bring the legislation more in line with the current economic climate and ensure that Bankruptcy, which has significant consequences, is reserved for those with sizeable debts.
Insolvency proceedings have previously been an effective way of recovering certain debts under £5,000.00. The changes may therefore may have an impact on your recovery process. There are however still options available to creditors owed less than £5,000. If you would like further information on what your options are or you would like to discuss a particular matter please contact Karen Chapman on 0345 209 1673.
The limits for Statutory Demands and Winding Up Petitions against limited companies and LLP’s are not affected by the rule changes. Therefore the threshold of £750.00 will remain in place in respect of corporate debts for the time being. If you are owed money from a company or an LLP and are not sure whether insolvency action is appropriate we would be happy to discuss.
If you are owed money from a company or an LLP and are not sure whether insolvency action is appropriate, please contact a member of our Debt Recovery team who will be happy to discuss.