On the Money: It’s getting harder — and cheaper — for you to go bust

There’s good news for financially struggling people; from next month it will be harder for your creditors to force you to go bankrupt. At the same time, if you decide to become insolvent, it’ll get easier and cheaper.

Long-overdue changes to insolvency laws finally come into force on October 1.

The main one, which will protect more people from being forced into this position, is that the minimum debt needed before a creditor can ask a court to make an individual bankrupt is climbing from £750 to £5000.

The £750 figure was actually set back in 1986 and was designed to stop people being made bankrupt over low-value debts.

The fact that it hasn’t been raised since has left unscrupulous creditors with the opportunity of forcing a bankruptcy on someone over what is really quite a small amount.

If the minimum debt had increased in line with inflation since 1986, it would have been worth around £2000 by now, which had led to much lobbying for it to be increased to protect consumers from predatory creditors.

The fact that it will be raised to £5000 from the beginning of next month means that there could be around 2000 fewer bankruptcies every year, experts reckon.

But this doesn’t mean fewer people will become insolvent. More are likely to choose debt-relief orders which are a low-cost alternative to bankruptcy.

Under the changes, these will become more accessible, which is good news for those who’s finances have reached critical stage.

Becoming insolvent is not an easy decision.

It will affect your chances of being able to borrow again and, for some, it can be years before they return to a sound, financial footing.

But for others it may be the only way they can repair their finances.

It effectively wipes the slate clean so you can start again — albeit you will need to work hard to prove to finance firms that you are a safe bet.

Debt-relief orders are often known as bankruptcy-lite.

They’re less expensive and less onerous than full-blown bankruptcy, and are aimed at people with lower levels of debt but still no realistic prospect of paying it off.