When to Apply to Bankrupt a Debtor

When owed money by a debtor, threatening a petition for bankruptcy is the strongest action that can be taken.  However, when chasing debts the aim is ultimately to ensure all of the debt is repaid and a petition for bankruptcy is unlikely to achieve that. So when is it a good idea to take this course of action?

The bankruptcy limit is currently £750 however this will be raised to £5000 as from 1st October 2015. Therefore if a debtor owes you more than this amount, and you are able to prove it to the court, then you can apply to make them bankrupt. Filing a petition for bankruptcy does however incur a significant amount of costs for both court proceedings and (if the petition is successful) the administration of the bankruptcy.

If the petition is successful, the court would appoint a trustee to collect the debtor’s items to sell them and the proceeds of sale would be used to cover the expenses of the proceedings, only leaving any remaining funds to be paid to the creditor.

Therefore, applying for a petition for bankruptcy isn’t always the best action to take as most creditors who do so don’t receive full repayment of their debts. However, if you are sure the debtor is able to pay and is simply just refusing to then it may be a good idea to threaten this action as a bankruptcy petition would have a huge impact on them and therefore might push them to pay. Another situation when making a petition for bankruptcy may be the best idea would be if there was no hope at all for debtor’s financial situation and so there is absolutely no way they can repay the debt then at least this way you could receive partial payment from the sale of their assets.

In all other situations, when chasing debts it is better to firstly try communicating with the debtor and trying to reach an agreement. If you haven’t received a response or payment from a debtor then please do not hesitate to contact out Debt Collect Team who are highly skilled individuals who have extensive debt recovery and bankruptcy experience on 0800 321 3258.

This entry was posted in Debt Collection.