R3 are calling on the government to consider raising this threshold to £3,000. Vote in a poll to express your view at which level they should be set.
This week, in response to government proposals, R3 – the Association of Business Recovery Professionals, called for a rise in the current bankruptcy petition thresholds.
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Currently the level of debt that a creditor can seek a bankruptcy order on an individual is £750.
R3 are calling on the government to consider raising this threshold to £3,000.
Relative to the current levels of secured and unsecured debt in the UK, £750 is a very low proportion that will allow banrkuptcy orders to be initiated by creditors.
Business Minister, Edward Davey commented:
to threaten someone with bankruptcy for such a small amount is disproportionate.
So the question is, at what level should the threshold be set?
We have already started debate on the subject with insolvency professionals.
When considering your answer you could take into account the following thoughts – from ClearDebt’s Andrew Smith:
“The idea of a threshold at which a creditor can initiatie bankruptcy proceedings against(a debtor is to strike a balance between what is a reasonable sum of money for a creditor to start a process which will have drastic effects on the debtor’s life and a level beneath which this threat is less of an effective recovery mechanism and more an opportunity to harass the debtor and persuade him to pay the creditor back, whatever his other financial woes.
“In 1986, when the current limit came in it was set at £750 – an equivalent value now would be around £1,700. But, the original figure has lasted for 25 years – so we should make some allowance for inflation. Also, people nowadays tend to owe a lot more than they did then: this may affect your thinking. On average, people who have credit card and bank loan (unsecured) debt owe around £15,500 – but that includes people who are coping as well as those that struggle”.
Vote in the poll and let us know your reasoning in the comments at what levels you regard as sensible that the bankruptcy threshold petition should become.