Friday, 11 June 2021

ESCAPING DEBT: Bankruptcy alternative CHANGES: England & Wales

If you are insolvent - what you owe is more than what you own - you can seek your own bankruptcy or wait for a creditor to do it for you. There are advantages and disadvantages to bankruptcy which I fully examine in the new edition of Breaking Law. The big advantage is that, generally, you are automatically released from your debts after one year.

There's an alternative to bankruptcy. It's a debt relief order and is easier and cheaper (just £90) to obtain. You seek it from the Insolvency Service through an approved debt advice intermediary such as the CAB. And it works in basically the same way as a bankruptcy.

The conditions for qualifying for a debt relief order are changing on 29 June 2021. The main change is that you can owe more to qualify. Currently, you are out if your debts come to more than £20,0000. That figure is rising to £30,000. No, DO NOT ratchet up another ten grand on your credit card tomorrow afternoon!!!

You are also currently out if your assets are worth more than £1,000. That figure is increasing to £2,000. But say you own a car? Up to £1,000 of its value is disregarded in totting up the value of your assets. From 29 June 2021, that £1,000 is doubling to - altogether now - £2,000. 

And one more change. You are also currently out if your surplus income comes to more than £50 per month after tax, national insurance and normal household expenses are knocked off. That figure is rising to £75.

An alternative to the alternative ((!) is an administration order from the county court. You can only go for that if your debts do not exceed £5,000. There the court can order you to make repayments over a period  of time but can also reduce the amount you owe.