Insolvency Proceedings: Debt Relief Orders and the Bankruptcy Petition Limit: Submission by Professor Iain Ramsay and Dr Joseph Spooner to the Insolvency Service Call for Evidence
17 Pages Posted: 28 Sep 2015
Date Written: October 8, 2014
The paper first considers the conditions which debtors must satisfy in order to obtain debt relief via the Debt Relief Order (DRO) and/bankruptcy procedures under English law. The paper considers that limitations on access to the DRO procedure based on debtor debt, asset and income levels are overly restrictive and may frustrate the procedure's aim of serving the fresh start policy and providing relief to over-indebted low-income individuals. The paper similarly argues for expanded availability of bankruptcy, through the reduction in the prohibitive costs of accessing this procedure. In this way, the paper argues for a "single portal" through which all debtors should enter the personal insolvency system, with only high value cases steered into bankruptcy, and all other debtors permitted to access the Debt Relief Order procedure. This rethinking of the personal insolvency system should also involve a reconsideration of the relationship between the statutory bankruptcy and DRO procedures and alternative debt management solutions consisting of consensual renegotiation of payment plans between debtors and creditors.
Secondly, the paper considers the question of the level at which the "debt threshold" for creditor petitions to initiate bankruptcy should be set. We consider the appropriateness of individual creditors using bankruptcy as a debt collection device, highlighting how this may seem contrary to bankruptcy's collective nature and potentially may be abusive in the disproportionate threat it can pose to debtors owing relatively small sums. We propose greater controls on the use of bankruptcy to collect an individual debt, outlining various possibilities for reform.
Note: This paper was produced as a submission to the UK Insolvency Service Call for Evidence on Insolvency Proceedings, which took place in autumn 2014.
Keywords: Consumer bankruptcy, debt relief, personal insolvency
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