Article by: Charlene Murray
The 1st October 2015 heralded a huge change for bankruptcy laws in England & Wales, indeed the first change of its kind in almost thirty years. Since 1986 a creditor has been able to commence bankruptcy proceedings where there is a liquidated debt of at least £750. Through periods of inflation, however, the protection it offered to debtors slowly declined and bankruptcy often became a reality for those who found themselves with low level debt which would never have been Parliament’s intention. As of the 1st October 2015, however, this limit has been increased to £5,000.
This is a change which has been welcomed by many as it affords much more protection to a debtor and also means creditors will now have to invoke alternative ways to pursue low value debts without the threat of bankruptcy at their disposal.
The position, however, in Northern Ireland remains unchanged. By virtue of Article 241(3) Insolvency (Northern Ireland) Order 1989 a creditor can issue bankruptcy proceedings where there is a liquidated debt of £750 or more. Bankruptcy, therefore, still remains a very real prospect for those who find themselves with low value debt in Northern Ireland and it may be time that this limit is increased.
It is widely viewed that the hardship experienced by a debtor as a result of being made bankrupt should not be precipitated by a debt as little as £750, not least as bankruptcy is an extremely expensive process and more often than not involves the debtor facing much larger debts as a result of the cost of the process. Further, bankruptcy is not a means of debt collecting as it is largely ineffective for returning money to creditors therefore when pitted against the drastic consequences for a debtor such as the potential to lose their home, bankruptcy should really be the reserve for more substantial debts than £750. An increase to the limit therefore would change the landscape for low level debt in Northern Ireland.
Consultations are currently taking place on an increase to this limit; however, as they are only in their infancy it remains to be seen whether the increase will take effect here and create parity with England & Wales.
If you have any queries about how this would affect you and your business, or you are curious about any of the issues raised in this article you can contact the Robert G. Sinclair & Co Debt department, e-mail email@example.com or contact reception on 02890 231770 and we can make everything clear.