Business Minister Jo Swinson has announced today changes to debt relief orders (DROs) and the bankruptcy creditor petition limit. These changes will make it easier for the financially vulnerable to manage problem personal debt and avoid them being precipitated into bankruptcy for low levels of debt. From 1 October 2015:

• DRO liability limit will increase from £15,000 to £20,000
• The DRO asset limit will increase to £1,000, plus a vehicle (worth not more than £1,000)
• The maximum surplus income a person can have to qualify for a DRO will remain at £50 per month
• A light touch monitoring of the intermediaries to maintain consistency
• The level of minimum debt that can trigger bankruptcy will rise from £750 to £5,000. The bankruptcy creditor petition level was last set in 1986.

We expect that following these reforms an additional 3,600 people a year will be eligible for a DRO. More than 140,000 DROs have been entered into since they were introduced in 2009. A survey of those who have used them reveals that 96% would have been unable to deal with their debts without a DRO, and 79% said the process had a positive impact on their lives. The changes to DROs will not disadvantage creditors, because eligibility for a DRO will continue to be restricted to those with very low amounts of realisable assets and no surplus income and therefore no realistic ability to repay their debts.

The Insolvency Service sought views from industry, debt charities and other interested parties on the operation of DROs and the bankruptcy creditor petition limit last year. Evidence showed that DROs help some of the poorest and most vulnerable people in society make a new start and improve their mental well being. Respondents also generally thought that the level of debts that can trigger bankruptcy was much too low, as people can be put through the most serious of the insolvency procedures for a debt as small as £750. 

One of the key areas of our investigation and enforcement activities is to promote confidence in the UK marketplace by promoting the fair treatment of customers by businesses and individuals.  When we tackle investment scams and the people behind them, we are helping to remove those scammers who reduce confidence in the business market place and cause harm to individuals’ financial and general wellbeing.

These scams generally operate in similar ways: cold calling and high pressure selling techniques, with investors “guaranteed” unrealistic returns for worthless commodities. Those targeted are often retired people with savings or lump sums to invest and scams often evolve to take advantage of new developments in technology or environmental issues. This allows fraudsters to exploit investors’ lack of knowledge of newer commodities. Recently, we have wound up a number of companies operating scams involving carbon credits and rare earth metals in which nearly £60 million was taken from around 2,400 investors.

Since June 2007, 168 companies operating investment scams have been wound up in the public interest following action by the Insolvency Service. We have also investigated a number of other investment scams by companies that have entered formal insolvency procedures and have so far disqualified 62 directors who ran those scams, for an average of 10 years each in order to prevent them from being able to control companies during the period of their disqualification.  These lengthy bans reflect the seriousness of the conduct identified and the need to protect the public from their actions.

Read more about combatting investment scammers on our website.

Sarah Albon joins the Insolvency Service on 2 February as our new chief executive. Currently Director of Strategy and Change at HM Courts & Tribunals Service, Sarah has led major change projects.  She joins us as we implement our five-year strategy to improve customer services, reduce our costs and continue to strengthen the UK’s insolvency regime. 

Sarah commented that she is “excited by the opportunity to lead the Insolvency Service at this important time as we further transform the public services we provide. The agency plays a vital part in promoting long-term economic growth through dealing with financial failure, giving confidence to investors and supporting those affected by financial distress. There are many synergies between the work I have led in the justice sector and the insolvency regime and I look forward to working closely with employees and stakeholders in this new role.”