The government recently announced that the amount of debt over which an individual can be made bankrupt will increase. The new bankruptcy threshold could result in a significant drop of people declared bankrupt, but will make it more difficult for creditors to recover debts from an individual.
This proposed change will come into effect from 1 October 2015 whereby an individual debtor cannot be made bankrupt unless they owe at least £5,000 by way of a single (and not multiple) debt.
These changes only have implications for creditors who are owed money by individuals. There is no indication that the new limit will also apply to the winding up of Limited Companies or Limited Liability Partnerships.
As a creditor it is important to consider how this will affect you. The first rule is don’t extend credit. Bankruptcy will no longer be a threat to debtors in respect of any debts up to £5,000 and even those debts which exceed £5,000 which the debtors are capable of reducing to below £5,000.
You will need to consider what remedies are open to you if you lend without security or provide goods or services on credit. If you have already issued a claim against the debtor and obtained a judgment which has not been satisfied you may want to consider the following methods of enforcement before the new changes comes in to force.
- Bailiffs – what is known about the debtor’s personal possessions?
- Third Party Debt Order – does the debtor have a bank account known to the creditor and which is or may be in credit?
- Charging Order – does the debtor own or have an interest in property?
There are other avenues for a creditor to pursue, but the above are the most common in practice.