Insolvency trade body R3 has called on the government to raise the bankruptcy threshold level and review the whole personal insolvency process.

Currently, an individual can be declared bankrupt if they owe as little as £750 if their creditors are successful with a petition.

That threshold was set in 1986, and R3 insist that it needs to be increased to a more realistic figure. If the threshold had risen with inflation, it would be around £1,700 today.

There can be a number of obstacles for people trying to work their way out of debt and pay off their creditors. Some may need to apply for a Debt Relief Order (DRO), which can be a cheaper alternative to bankruptcy. DROs give the debtor 12 months in which they don’t have to make payments on their debts so that they can get their finances on a more stable footing.

However, DROs are only applicable to individuals who owe less than £15,000 and have assets of less than £300. This means that a debtor who owes more than £15,000 or has assets of more than £300 is not allowed to apply for a DRO and can be left facing bankruptcy.

R3 want the government to raise these thresholds to a debt of £30,000 and assets of £2,000 to make DROs more accessible for people in financial difficulties.

R3 president Giles Frampton said: “R3 has been very keen for Debt Relief Order entry requirements to be reviewed. At the moment, these requirements are unnecessarily restrictive and prevent people from accessing a debt solution that could really help them.”

“Quite frequently, people can be caught between Debt Relief Orders and bankruptcy. Bankruptcy may be an appropriate way for some to deal with their debts, but it is not an option suitable for everyone.

“It is to be hoped there will be a comprehensive review of the personal insolvency landscape. There has not been such a review for three decades – one is long overdue.”