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The Bankruptcy Threshold for a Creditor’s Petition

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Posted in: Insolvency Law | Personal Insolvency 23 May 19

The number of people being declared bankrupt has reduced sharply in recent years, possibly because the threshold required for a creditor to issue a bankruptcy petition is £5,000.

The change came into effect from 1 October 2015 and was the first increase in three decades. The consensus was that the 1986 figure of a £750 limit was too low, however an uplift in line with inflation would have resulted in a figure of £2,500 so this was a very significant increase.

Issuing statutory demands with the ultimate threat of bankruptcy, is often used by creditors, collection companies and councils, to apply pressure on debtors to pay.

This change inevitably impacts upon small businesses to recover money owed to them; the only other option for them to collect a debt, is to obtain a judgment through the small claims court and then to use bailiffs or High Court Enforcement. This process can be slower, more time consuming and potentially more costly.

It should be noted that for limited companies, there are currently no proposals to raise the threshold, and a creditor can still apply to the court for a winding up petition (compulsory liquidation) if the debt is more than £750.

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Robin Tarling

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