Should the £750 limit for Statutory Demands be increased ?

[Amethyst]

There's a consultation, at long last, about raising the ridiculously low £750 limit for starting bankruptcy proceedings !

Please vote in our poll, what level do you thnk would be a fair level to allow creditors to instigate bankruptcy proceedings. The poll is open to registered and unregistered visitors to the site.

The Consultation is attached. Please have a browse and let us know your opinions. This is one consultation we will definitely be putting your views forwards on !


This call for evidence also asks whether we should make a change to the level of
debt above which someone owed money can ask the Court to make the debtor
bankrupt. Set in 1986 at £750, a person or business with an unpaid debt above this
amount is able to petition the court for an individual’s bankruptcy. I’m asking whether
£750 is still an appropriate figure to be able to trigger this strongest of debt recovery
tools.

This call for evidence is your chance to feed in your opinion and evidence on both
the success, or otherwise, of debt relief orders, as well as on what an appropriate
level for the creditor bankruptcy petition level is.

[Amethyst]

Re: Should the £750 limit for Statutory Demands be increased ?

3. Bankruptcy creditor petition limit
3.1 The minimal amount of debt a creditor needs to be owed in order to petition the
court for someone’s bankruptcy has been £750 since 1986. This has given
creditors, due to the effect of inflation, an enforcement option over low level
debts, which Parliament had not originally intended them to have.

3.2 Furthermore, bankruptcy is an extremely expensive way of recovering low level
debts. It is a judicial process, which will involve fees to cover the actions by the
Official Receiver, court costs including solicitor costs for creditors, and in cases
taken on by insolvency practitioners where there are sufficient assets to realise,
their fees. As a tool for returning money to creditors in low value cases it is
largely ineffective.

3.3 A Newsnight piece on 23 April 2014 highlighted a number of cases where
individuals had been placed into bankruptcy through a creditor petition for a low
value debt, but who had ended up facing far larger debts through the
bankruptcy process. One example was of a person originally with a £1,350
council debt that has turned into a debt of £80,000 through bankruptcy. Another
example was a couple with a £7,000 debt which turned into a £100,000 debt
through the fees charged in bankruptcy, and who were forced to sell their
house for £110,000, eventually only seeing £15,000 back. In addition the
Secretary of State has over the years received complaints from aggrieved
bankrupts complaining about the low level of the creditor petition level which
has been used to put them into bankruptcy.

3.4 Given its potentially devastating effect upon individuals and families,
bankruptcy should be used as a last resort by creditors to resolve any unpaid
debts.

3.5 There have also been a number of legal rulings where the appropriateness of
using bankruptcy as a tool for recovering small level debts has been
questioned. For instance in Ford v Wolverhampton CC the Ombudsman found
that there had been maladministration by the local authority insofar as it had
obtained a bankruptcy order against the debtor in respect of arrears of council
tax of £1,105. Commenting the Ombudsman said, “There is a question of
proportionality here, too. The council cannot turn a blind eye to the
consequences to the debtor of any recovery option it pursues……. The dire and
punitive consequences of bankruptcy, involving a multiplication of the original
debt many times over and frequently incurring the loss of the debtor’s home,
must be a factor to be taken into account in deciding that the ‘last resort’
[bankruptcy] is indeed appropriate.”

3.6 In another case, Hunt v Fylde BC the issue of human rights was raised by the
district judge, “as we contemplate an individual losing his home for a small tax
liability when the more proportionate remedy of a charging order subject to
court control is better”.

3.7 These rulings however may not have wider application to cases that do not
involve a petition brought by a local authority. Further in Griffin v Wakefield
Metropolitan DC, Judge Walker, referring to bankruptcy, stated that there can
be no objection to the use of a procedure which is permitted by statute and
regulations.

Devolution
3.8 Any change to the creditor petition limit would cover England and Wales only.
Bankruptcy (sequestration) is devolved to Scotland where the petition limit for
bankruptcy in Scotland was changed to £3,000 in April 2008. All insolvency
matters are devolved to the Northern Ireland Executive. The creditor petition
limit is £750 in Northern Ireland.

Potential changes

3.9 Applying an inflationary adjustment, would return the level for the creditor
petition limit to the real values envisaged by Parliament in 1986. Table 16
shows these values for CPI inflation for 2013, and for the GDP deflator – up to
the end of the financial year 2013/14.

Table 16: Inflation adjusted credit petition limit
Inflation Adjustment Credit petition limit
CPI £1,700 (2013 value)
GDP deflator £1,600 (2013/14 value)

3.10 We have also looked at the various limits in place in selected other countries.
Whilst a number of European countries have no creditor petition limit
(Germany, Italy and Spain), a number of others have recently revised the limit,
most notably the Republic of Ireland, which raised its limit to €20,000 (£15,900)
in December 2013.

3.11 Finally we turn to look at the impact any change would have on the number of
bankruptcy petitions by creditors. Table 18 combines Ministry of Justice data on
the total number of creditor petitions in FY 13/14 (11,900) with the data held by
the Insolvency Service on creditor petition orders (5,145) including the amount
of debt owed in the creditor petition.

3.12 The impact of any change to the creditor petition limit will be felt on all credit
petitions lodged at the court. Creditor petitions are used by creditors as a tool
for recovering debt, so following repayment the petition will often not need to
move to a bankruptcy order. In constructing Table 18 we have assumed that
the distribution of the creditor petition amounts is similarly distributed for
creditor petitions which do not end up as orders, as for the orders for which the
data is taken.

3.13 Table 18 shows that an increase in the petition limit to £2,000 would have led to
404 fewer creditor petitions in 13/14, 3% of the 11,900 creditor petitions there
were in that period. Meanwhile an increase to £3,000 would have led to 979
fewer creditor petitions, 8% of the total.

3.14 This is likely to be an overestimate of any impact on the level of creditor
petitions, as for some cases it may just lead to a creditor waiting until a higher
level of debt is incurred before issuing a petition.

[Nibbler]

Re: Should the £750 limit for Statutory Demands be increased ?

We are asking whether this figure should be increased.

Do bears do something private and certain arboreal areas?

[Amethyst]

Re: Should the £750 limit for Statutory Demands be increased ?

lol, okay, rephrased, HOW MUCH SHOULD IT GO UP TO ?

[wales01man]

Re: Should the £750 limit for Statutory Demands be increased ?

The whole Debt industry needs bringing into the 21sr Century raising the SD level is a start 10k seems a good starting point.

[Amethyst]

Poll:

Bankruptcy Petition Minimum Level Poll added xx

[wales01man]

Re: Poll:

10K IMO

[Amethyst]

Re: Should the £750 limit for Statutory Demands be increased ?

Just out of interest I've just gone through the WON!!!! Statutory Demand forum... I'll go through them all in time but as a quick snapshot these are the amounts of the debt the stat demand was being bought on.

Based on 25 Stat Demands ....

[Crazy council]

Re: Should the £750 limit for Statutory Demands be increased ?

Hi

The LGO gave guidence to councils that the debt should be at least over 2K a few years ago.

I don't think you can fairly set a higher limit ( because people world just abuse it ), but ther should be rules that Cos have to follow prior serving a stat demand. (In fact, i wold have a seporate set of rules for public bodies applying for SD, than businesses. )

I think the best rules around debt would be statutory rules to make sure that the claimant has made reasonable endeavours to get the debtor to pay. And that the accounts are accurate.

That fair both ways, its stoip companys using the courts as debt collectors, but would allow companys to put people who are just messing you about to not pay in court asap.

I could not agree on raising the minimum past £ 1500, like i say, i have dealt with people in the past that never pay untill they get to that stage, even though it costs them more. I allways thought that they were that used to other companys doing nothing and considered i would follow.

Any higher and small shop keeper would have the threat of bankrtuptcy against there debitors removed and that would reallt fubar the system.

[Crazy council]

Re: Should the £750 limit for Statutory Demands be increased ?

i can give my own example on this statment

. One example was of a person originally with a £1,350
council debt that has turned into a debt of £80,000 through bankruptcy. A

Mine was, a claim for 10K letter befor claim 2006 ), 5600 on stat demand ( 2006 ), 3400 at bankruptcy ( 2007 ) 4400 sent to OR claim ( 2007 ), 2400 readjustment for over charges. ( 2012 )

Leaving 2200 ( less than my current years liability )

For this, the charges was a STAGGERING £ 238,000 for the trustee,

But, ther eare rules around the trustees charges for bankruptcy that changes in 2010.

[Amethyst]

Re: Should the £750 limit for Statutory Demands be increased ?

It would probably make sense to tie it to the small claims limit in court, then debt under 10k can be sued for in court and subsequent enforcement options, and fast track value claims could petition for bankruptcy where appropriate ? Or as Jules was just saying tie it to the DRO maximum level ?

[Ruby]

Re: Should the £750 limit for Statutory Demands be increased ?

Table 16: Inflation adjusted credit petition limit
Inflation Adjustment Credit petition limit
CPI £1,700 (2013 value)
GDP deflator £1,600 (2013/14 value)

It should at the very least be at today's inflation value! Its outrageous that it has not been reviewed for almost 30 years. Personally I believe it should not be lower than £3000. We all know of one particular DCA who likes to throw SDs around like confetti. DCA's have no morals of their own and I feel even in today's financial world they are 'bending the rules' and getting away with too much.

[Nibbler]

Re: Should the £750 limit for Statutory Demands be increased ?

It would probably make sense to tie it to the small claims limit in court, then debt under 10k can be sued for in court and subsequent enforcement options, and fast track value claims could petition for bankruptcy where appropriate ? Or as Jules was just saying tie it to the DRO maximum level ?

DRO limit seems about reasonable to me from what I've seen over the years.

Did wonder if the courts should be allowed a level of discretion on the limit to allow more proportionate solutions in some circumstances, but could bring it's own list of problems and abuses.

[Ruby]

Re: Should the £750 limit for Statutory Demands be increased ?

Hmmm, Scotland its £3000 and England/Wales £750 HAVE YOU GUYS DOWN SOUTH BEEN FAST ASLEEP FOR THE PAST 30 YEARS, LOL

[enaid]

Re: Should the £750 limit for Statutory Demands be increased ?

I think 10K, small claims court is exactly that SMALL CLAIMS so why should any one be able to have the potential to ruins ones future or life for a pittance in this day and age of £750.
I think at least (or I should say hope) that if it does go to court then both sides will be able state exactly what has gone on with the debt and therefore it be dealt with properly and fairly for both parties.