Specialist Support Land and property Services (LPS) and the new Bankruptcy Rules

In November 2017, the Northern Ireland Bankruptcy Legislation change and one of these changes meant that a creditor cannot apply to petition a client for personal bankruptcy if the debt is under £5k.

This has had an impact on the recovery of unpaid rates under £5k by the LPS.
A common query received by Specialist Support is if a Statutory Demand has been issued by the LPS can a client make a payment to reduce the amount under £5k? 
The answer is they can. However, Specialist Support warn that this is only a short-term solution to prevent the Statutory Demand being enforced and an adviser should look at the longer term situation for the client.
In the long-term the debt will not go away. LPS will look at ways to recover. The LPS will request a County Court Judgement (CCJ) before the Statutory Demand is issued, so they will proceed to the Enforcement of Judgements Office (EJO) to enforce the CCJ to ask for an Order Charging Land to be put against the property.
The EJO will conduct an Examination of Means to that will consider ways of getting payment which will assess the client’s financial circumstances and may mean an EJO issue an Attachment of Earnings on their salary. Passing the debt to the EJO to be enforced, will incur fees which are based on a sliding scale. For a debt of £5k the EJO costs would be £540 for which the client is liable.
If a client receives a Statutory Demand, instead of using the lump sum to reduce the amount to below the £5k, an option would be to contact the LPS to make an arrangement to pay.   The LPS team will consider the client’s personal circumstances, payment history and check if they should be entitled to reduction in rates that they are not aware they should have been claiming. It will also prevent them incurring the EJO fees which will only exacerbate the situation.
The Statutory Demand expires after 21 days. If there is no contact from the client the LPS will apply for a petition for Bankruptcy. The client will receive a date for a Hearing. The only way this can be stopped is if the all of the money owed plus any legal fees are paid in full (the legal fees incurred in respect of bankruptcy are approx. £900-£1000). LPS is unable to accept partial settlement at this stage. Should the case be settled and paid in full before the date in the High Court, the fees are still due and will be sought. LPS are working at including any legal fees in any future rates bills, which will mean they will also then be subject recovery in future proceedings as previously they were not included in the bankruptcy petition. If bankruptcy petition is granted the client’s home may be at risk if there is equity. The client will also be liable for the fees of the Trustee in the Official Receivers Office. The EJO enforces the court order the Official Receiver deals with client’s assets if any.
The Specialist Support is available by telephone 02890645919 or email specialistsupport@adviceni.net. The service is available Monday, Tuesday, Wednesday 10.00am to 4.00pm, Thursday and Friday 10.00am to 1.00pm.   
Specialist Support NI at Advice NI is funded by the Money Advice Service and is available to support all debt advisers, money advice workers and their managers/supervisors throughout Northern Ireland with any complex cases.