Bankruptcy limit increases from £750 to £5,000

Changes to insolvency laws in Northern Ireland, due to the Insolvency (Northern Ireland) Order 1989 (Amendment) Order (Northern Ireland) 2016 coming into force, mean that as of 30 November 2016, a creditor must be owed at least £5,000 before being in a position to petition for a debtor’s bankruptcy. This is a substantial increase from the previous threshold of £750, which has been in place since 1989.

Previously, a creditor who was owed £750 or more could issue a statutory demand against the debtor. If the debt was not paid within 21 days the creditor was at liberty to petition for the debtor’s bankruptcy. This was a very persuasive debt recovery method used for many years and the recent change will have a serious impact on the methods available to creditors to recover debts under the new threshold.

Debts below £5,000 will now have to be pursued through the Small Claims Court (up to £3,000) or the County Court (between £3,001 and £30,000). County Court proceedings will be more time consuming and potentially more costly. This will cause creditors to rethink how they recover debts and could result in a move towards more informal debt settlement methods.

There are no proposals for increasing the threshold for petitioning for the winding up of a company and a creditor can still issue a statutory demand against a company if owed £750 or more.

In addition, a further change which became law on 30 November 2016 under the Insolvency (Monetary Limits) (Amendment) Order (Northern Ireland) 2016 raises the limit on the level of debt and the total assets which an individual can have to qualify for a Debt Relief Order, which is a debtor-friendly alternative to being made bankrupt.  The maximum debt level goes from £15,000 to £20,000, and asset value from £300 to £1,000.

These are the latest changes in a raft of amendments to NI insolvency legislation during 2016, which bring Northern Ireland into line with practice and procedure in England and Wales, and in Scotland.  The underlying policy direction is to soften the draconian effect of bankruptcy, and to avoid using it as a tool to recover relatively low unsecured debts, reserving it for more sizeable debts. The reforms also include a more robust regulatory framework for insolvency practitioners, in order to provide more transparency and fairness for everyone involved in the insolvency process.

If these important changes affect your business or you would like to discuss further please contact

While great care has been taken in the preparation of the content of this article, it does not purport to be a comprehensive statement of the relevant law and full professional advice should be taken before any action is taken in reliance on any item covered.