Recent Changes to the Northern Ireland Insolvency LegislationDecember 16, 2016
On 30th November 2016 a number of important amendments to the principal Insolvency Legislation in Northern Ireland, the Insolvency (Northern Ireland) Order 1989 (“the Order”) came into effect.
1. The Insolvency (Northern Ireland) Order 1989 (Amendment) Order (Northern Ireland) 2016
This statutory rule increases the level of debt that must be owing to a Creditor before they can petition for an individual’s bankruptcy from £750 to £5,000. It applies to any statutory demands and bankruptcy petitions which are issued after the 30th November 2016.
For many, this increase is seen as a sensible one. The previous level of £750 had been in place since 1991 when the Order was enacted and undoubtedly required updating given the passage of time. In addition, the current insolvency case load in the High Court is extremely high. It is hoped that the increase in the debt level will encourage parties to consider other routes of debt recovery, such as the Small Claims Court, as well as trying to settle matters without the need for any formal enforcement action. The changes should also ensure that bankruptcy proceedings are only used in the most appropriate cases and that the costs and outlay which have to be paid are proportionate to the debt being recovered (outlays alone to bankrupt an individual are in the region of £900-£1000).
Understandably, not everybody will be happy with this change and many Creditors will be disgruntled with the increase. Whilst Statutory Demands are not meant to be used for this purpose, in reality, many Creditors will use a Statutory Demand or indeed the threat of a Statutory Demand, in order to encourage payment of an outstanding debt.
The change has brought the bankruptcy levels in Northern Ireland in line with those in England and Wales. As the new levels only apply to Statutory Demands and Bankruptcy petitions issued after 30th November 2016 it will take some time to identify changing local trends, if any. In England & Wales, figures reported by the Insolvency Service for Quarter 3-July to September 2016 showed that bankruptcies on foot of a Creditor Petition had fallen by 3.7%. It is believed that this reduction is in response to the amendments that have already been made in England and Wales in relation to the bankruptcy processes and levels.
2. The Insolvency (Monetary Limits) (Amendment) Order (Northern Ireland) 2016
This statutory rule sets out a number of important changes to the eligibility criteria for an individual to enter into a Debt Relief Order (“DRO”). It increases the level of debt that an individual can have in order to apply for a DRO from £15,000 to £20,000. It also increases the total value of property which they may have from £300 to £1,000.
The amendments have been made to bring the DRO Provisions in line with those in place in England and Wales. The levels have also been increased to encourage individuals to consider a DRO as a viable option for dealing with their debts. A DRO can be a much cheaper option than an individual having to petition for their own bankruptcy. The DRO Provisions were initially brought into Northern Ireland in 2011 and according to statistics from the Department for the Economy; around 2,000 people have successfully entered into DROs since their introduction. It is hoped that by increasing the level of total debt which an individual must have, as well as the total value of assets, this will enable more individuals to benefit from the provisions and avoid the costs and indeed, the restrictions and impacts of bankruptcy.
It should be noted that the increase in the Bankruptcy Petition levels apply only to personal bankruptcy petitions and not Winding up Petitions against Companies. The level of debt which needs to be outstanding before a Creditor may present a Winding up Petition remains £750.00.
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This Article was prepared by:-
Caitriona Morgan, Associate
DDI: 028 9027 1375
Charles Stuart, Paralegal
DDI: 028 9027 1319