As of the 1 October 2015, the minimum level of debt that can trigger bankruptcy has risen from £750 to £5000. This is the first increase of the bankruptcy threshold since it was set 30 years ago.
The new rules mean that you can no longer serve statutory demands or petition for a debtor’s bankruptcy for an undisputed debt below £5000.
If creditors wish to collect debts, which fall under £5000, there is only one practical way to force a debtor to pay and that is to obtain a county court judgment in a small claims court.
However, creditors should take a strategic approach when considering a county court claim for a debt of this value as the usual rule that the loser pays the winners costs does not apply in the small claims court. Therefore, unless there is a contractual right to recover costs associated with recovery of the debt, a judgment creditor will only be able to recover minimal fixed costs and court fees.
If the debtor fails to pay after obtaining a county court judgment, then a creditor will need to explore its options for enforcing the judgment for instance by:
- Obtaining a charging order against the Judgment debtor’s property
- Attachment of earnings order to make deductions from a Judgment debtor’s salary
- Third party debt order to freeze money in a Judgment debtor’s bank account
- Appointing bailiffs or High Court Enforcement officers to take control of goods, by attending a Judgment debtor’s property to collect the money or sell goods to pay the debt
For any advice in relation to issues raised in this article, please contact Urmi Ahmed of the Commercial Litigation team on 01242 586 864 or at firstname.lastname@example.org.