Bankruptcy petition level rises to £5,000
by David Asker
On 1st October 2015, the minimum threshold for a creditor being able to start bankruptcy proceedings against a debtor rose from £750 to £5,000.
This means that a creditor will have to be owed at least this amount in order to be able to issue a statutory demand to the debtor for the collection of undisputed debts, in order to start the bankruptcy process.
This change is expected to have an impact on both creditors and landlords, especially commercial landlords.
The threat of a statutory demand has often been an effect tool for encouraging payment, but as this is now removed for debts below £5,000, creditors and landlords will find themselves going to court more frequently to obtain a judgment before they see payment.
Whilst going to court is an effective means of getting paid, it is a longer process than serving a statutory demand and then taking action 21 days later.
On a positive front, the credit crunch and recession have caused many creditors to tighten credit control procedures, reducing their exposure to bad debt.
Commercial landlords may also want to look at options to reduce their exposure, if they have not already done so. Larger deposits, monthly rather than quarterly payments and personal guarantees, are some of the options available.
To the best of our knowledge there are no proposals to increase the £750 threshold for issuing winding up petitions.
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Should I sell or re-let my London flat or both?
Member Since May 2014 - Comments: 145
10:27 AM, 10th October 2015, About 11 years ago
Another slap in the chops against landlords, tenants can now effectively just walk away with debts of up to £5,000 CCJ’s are useless as they are only registered to the last known address of the debtor so they just move property and the next time they have a credit check they just say “Oh I was living at my mums house or a friends house”. A clean credit check comes back. The only thing that will now work is if the tenant already owns a property or you get a guarantor who has property all of the other methods are useless. Why is the legal system so weak for creditors who pursue debts?
Why was this deadline date of 1-10-15 not reported more widely in the media, RLA/NLA websites news articles. I have an ex tenant who I was just about to start bankruptcy proceedings on.