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Reforming Personal Insolvency in England and Wales: R3’s Proposals on Bankruptcy Duration, DRO and Income Thresholds, IVA Simplification and Stronger Debtor Compliance

Published on: 28 January 2014

Published by a LexisNexis Restructuring & Insolvency expert
Legal News
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Article summary

Original news Report: The Personal Insolvency Landscape—A way forward for formal debt relief

The Association of Business Recovery Professionals (R3) has published a paper seeking to restore balance and coherence to the personal insolvency framework in England and Wales.

What are the current problems with the personal insolvency regime?

At present, the principal shortcomings are:

Limits

Existing thresholds are out of date. For example, a creditor can still petition for bankruptcy where only £750 is owed. This figure has remained unchanged since 1986—something in the region of £3,000–£5,000 would be more appropriate.

Bankruptcy period

The default one‑year bankruptcy term is too brief—it should revert to three years, with an early discharge after a year where bankruptcy occurred without personal fault. For the most imprudent cases, there ought to be scope to lengthen the period up to 15 years.

Consistency

Courts apply the ‘reasonable income’ benchmark to debtors inconsistently. Some degree of regional variation should be reflected when assessing individual circumstances—it’s widely acknowledged...

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