2,000 fewer people set to be declared bankrupt every year after changes in rules

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​CHANGES to the insolvency regulations next month mean 2,000 fewer people are likely be declared bankrupt every year.

New financial thresholds and increased use of a low-cost alternative to bankruptcy take effect from October 1, which have been campaigned for and welcomed by the insolvency trade body, R3.

The organisation believes the new regime will be better for both debtors and creditors, and offers a greater chance of financial rehabilitation for those in difficulty.

The changes mean it will become harder for creditors to make individuals bankrupt as a result of unpaid debts. There were about 20,000 bankruptcies last year.

Currently, for a creditor to ask the court to make an individual bankrupt, they must owe a minimum of £750. That figure is being increased to £5,000.

R3 has campaigned to have the minimum increased because the £750 level was set in 1986 and designed to stop people being made bankrupt over very low debts. But if the minimum debt had increased in line with inflation since 1986, it would have been worth almost £2,000 in 2014.

The other big change is that debt relief orders, an alternative to bankruptcy and cheaper to administer, are going to be more accessible, which is likely to mean about 3,600 more of them are going to be made every year.

To enter a debt relief order, an individual must owe less than £15,000 and have under £300 of assets. Those thresholds are rising to £20,000 and £1,000.

The orders will save money for both the Government and those involved in the insolvency procedure.

Bankruptcy costs £705 in administration and court fees to enter, which R3 says some people cannot afford. But debt relief orders only cost £90.