Is the personal insolvency regime fit for purpose?

Is the personal insolvency regime fit for purpose?


What are the current problems with the personal insolvency regime?

Currently, the key issues with the insolvency regime are:


The limits that are in place are outdated. For instance, the amount that a creditor needs to be owed before making someone bankrupt is still as low as £750. This amount hasn’t been changed since 1986—£3,000–5,000 would be a more suitable scale.

Bankruptcy period

The standard bankruptcy period of one year is too short—it needs to go back to being three years, with an option to come out after a year if you have gone bankrupt through no fault of your own. There should also be an option to extend the bankruptcy period to a maximum of 15 years for the most reckless individuals.


There is no consistency as to how the courts will apply a ‘reasonable income’ threshold to debtors. To a certain extent, regional variations need to be taken into account in assessing people’s circumstances—it’s widely acknowledged that there are massive inconsistencies in the way people are treated. The minimum income threshold is too low in that it allows no room for flexibility, debtors are unable to cope with the burden of emergency expenditure or sudd

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