August 15, 2014

Insolvency rules to be reviewed

The Insolvency Service is weighing up the merits of whether to raise the debt threshold, which was set at £750 almost three decades ago.

If it had risen in line with inflation, it would now be around £1700.

The service is also asking for views on improving debt relief orders – which were introduced five years ago for those trapped with debts of less than £15,000, with no means of paying off the sum.

Business Minister Jo Swinson said: “Bankruptcy has serious consequences and there is a strong argument that bankrupting someone for a debt of £750 is no longer fair or reasonable, especially when there are often alternative cheaper ways for those owed money to seek repayment.

“I’m also keen to ensure that debt relief orders continue to meet the objective of helping the most financially vulnerable with a low-cost way out of problem debt.”

A number of charities and R3, the insolvency practitioner trade association, have welcomed the news that ministers are taking another look at arrangements.

Gillian Guy, chief executive of Citizens Advice, said it was “staggering” the debt threshold had not been reviewed for 28 years.

“People who hit financial rock bottom need to have a way out,” she said. “A review of debt relief orders has been long-awaited and could help people whose spiralling debt has left them with few options.”

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