The government has proposed raising the threshold at which a creditor can petition for bankruptcy after dubbing the current level “disproportionate”, as part of its response to a call for evidence on its personal insolvency review.Creditors can currently petition to make someone bankrupt for a debt valued at £750, a figure which has not changed since the Insolvency Act 1986.
But the government has now said being able to threaten bankruptcy for such a small amount is disproportionate and has proposed a consultation on increasing the petition debt level.
Lee Manning, vice-president of insolvency trade body R3, welcomed the proposals.
He said: “R3 welcomes the government’s announcement today to consult on increasing the petition debt levels for creditors. R3 believes that a rise from the current level of £750 to £3000 would be a more appropriate sum for a creditor to petition for bankruptcy.”
In other proposals a separate consultation has been suggested on how to facilitate access for bankrupts to a basic bank account.
The government has also proposed strengthening voluntary codes of forbearance where debtors need time to seek debt advice or recover from sudden loss, and making the Money Advice Service (MAS) the central coordinator of debt advice.
The MAS should also research and develop a delivery model for a protocol setting out what to expect from a Debt Management Plan.
Business minister Edward Davey said: “I am convinced that there is more that can be done to improve the delivery of debt advice to the most vulnerable, and intend that MAS take up this work.
“I want to see creditors, debtors and particularly providers working together to improve standards in debt management, so that debtors are directed only to those operating the very best service, leaving no place for the rogue providers who are only in it to make money for themselves.”