INCREASED HELP FOR THOSE IN DEBT

The government has announced that from October 2015 the minimum level of debt for which someone owed money can force a person into bankruptcy from £750 to £5000. These limits were last revised in 1986. It is likely to be a controversial measure as the increase is significant and the evidence collected by the government on the subject demonstrates that a number of interested parties has called for a more modest increase.

This change will take place as respondent’s thoughts that the debt that can trigger bankruptcy through the courts were disproportionate as people can be put through the most serious of debt recovery action for a debt as small as £750. There are also other ways for those owed money to recover their debts such as action in the small claims court.

It is well known that the courts bankruptcy jurisdiction is often used by creditors to put pressure on debtors to pay. However the Courts position that this is an abuse of process is clear and it may be that the increase is partially intended to put an end to this practice.

Also announced recently is the plan that will allow approximately 3600 more people a year with a debt problem to enter into a Debt Relief Order (DRO). This is a low cost alternative to bankruptcy for those with very low assets and income and debt which they’re unable to pay. The maximum amount of debt that can be covered by these plans will increase from £15,000 to £20,000.

Related changes also include the DRO asset limits raised to £1000 plus a vehicle worth no more than £1000. The maximum surplus income a person can have to qualify for a DRO will remain at £50 per month.

Business Minister Jo Swinson said ‘Struggling with unresolvable debt can cause immense stress for families. These changes will ensure that our debt relief schemes are updated so that they still meet their original goal of providing access to those who need them. They also ensure that bankruptcy, which has the most significant consequences, is reserved for those with sizeable debts.’

Evidence suggests that DRO’s help some of the poorest and most vulnerable people in society make a new start and improve their mental wellbeing. The new changes will allow more people to get a resolution when faces with debts they can’t afford to pay.

If you are struggling with debts you can call the National Debtline (0808 808 4000).

If you need advice on how to save money to avoid facing debt problems and bankruptcy contact us on 0113 2864486.