New help for people struggling with debt

The level at which people in debt can be forced into bankruptcy has been increased for the first time since 1986. The Insolvency Service has announced that the minimum amount for which someone owed money can start bankruptcy proceedings is to rise from £750 to £5000.

The announcement has been long overdue, according to Debt Advice Foundation chief executive David Rodger.   He said: “It has been very frustrating to see people faced with the long-term consequences of bankruptcy for a relatively low level of debt.  We have been particularly incensed, for example, by some local authorities that moved to bankruptcy proceedings for outstanding council tax debts of say £1500 without first engaging with the debtor to see if there was an alternative solution.”

The Insolvency Service also announced that the rules governing Debt Relief Orders (DROs) are to be changed, allowing more people to take advantage of the low-cost alternative to bankruptcy.   The maximum amount of debt that can be covered by DROs is to increase from £15,000 to £20,000.

David Rodger added: “These changes will help many people who are struggling with debts to find a way out of their difficulties and to put them on track to a more secure financial future.

“It has long been one of the cruel ironies of indebtedness that costs can pile up very quickly, making the situation worse virtually week by week.

“These changes should encourage more creditors to take a more pragmatic approach and to help us find fair, workable solutions for people with unmanageable debts.”

For more information on this announcement, click here