Bankruptcy limits increase


When discussing the recovery of debts with clients, we’re often asked “which is a better course of action – statutory demand or issue proceedings through the County Court?” Richard Anderson, Head of Debt Recovery, considers the ups and downsides of both options.

Statutory demands_

A statutory demand is a low cost option and it’s quick as there is no delay or costs associated with going to court.    It’s effective in concentrating the debtor’s mind as if no payment has been received after 21 days, or the debtor has not made an application to set the demand aside, you can proceed to issue a petition at court to obtain a bankruptcy order against that debtor.

Understandably, companies do not typically wish to be wound up and individuals tend not to wish to be made bankrupt. The strategy is to instil sufficient pressure upon the debtor so they will pay to avoid any further action being taken.

However, a statutory demand cannot be used in all circumstances. It cannot be used for:

  • Debts of less than £750
  • Debts which are in dispute

However from the 1 October 2015 the minimum level of debt to trigger “bankruptcy” will rise from £750 to £5000 for individuals only. So businesses and creditors need to consider debtor’s lists well in advance of 1 October 2015 deadline and begin procedures to recover overdue debt and to take advantage of the current rules.

Where it a statutory demand is not appropriate, the alternative is to issue court proceedings.

Much more debt will fall outside the scope of bankruptcy proceedings which means that court proceedings will have to be issued to secure judgment and thereafter to take enforcement proceedings.

Court Proceedings_

A claim for payment of the debt and court expenses should be issued, and served upon the debtor, by the court. This can be done through the money claims on-line system (MCOL) subject to the level of debt up to a maximum of £99,999-00.

The receipt of court issued proceedings usually prompts the debtor into realising they can’t ignore the debt and they contact you to pay you in full or to negotiate a deal.

If the debtor defends or disputes the claim then you should seek professional advice as you may then be able to issue an application for summary judgment (i.e. the defendant does not have any real prospect of successfully defending the claim).

If the debtor does not defend or dispute the claim then you can proceed with enforcement. There are many enforcement options open to you, for example, you can instruct the High Court Enforcement officer to seize the debtor’s assets or proceed with a charging order over the debtor’s property.

Any outstanding debt should be assessed on its own merits, whether against an individual or against a company, particularly where it is disputed.

For a no-obligation discussion regarding the best route to pursue a particular debt please contact Richard Anderson on 01782 205000 or