Debt experts are warning that the rising cost for petitioning bankruptcy may discourage people from seeking a solution, with costs rising steeply from £75 to £525 at the start of the month. And with the court fee added on, the total cost could be as much as £700.
Overall, the fees of petitioning bankruptcy have risen by 37% since March last year.
Bankruptcy is the traditional way of freeing yourself from the burden of debt and making a fresh start. It ends after one year, and the bankrupt will usually lose all of their assets, including their house, to pay something back to the creditors.
So why has the cost risen so abruptly? The Insolvency Service said the rise was due to covering the administration costs. The £525 is a deposit to cover the costs of managing a bankruptcy and the Insolvency Service then recovers a full administration fee of £1,715 from the bankrupt’s assets or income at a later stage.
The deputy head of the Insolvency Service, Graham Horne, said the sum was not being increased: "The fee is staying the same but we are increasing the proportion of that fee which we get on day one.”
The Insolvency Service’s income is said to have reduced because of the falling value of homes and other assets which are recovered from bankrupts.
Jon Elwes, from the Money Advice Trust, said: "This increase in the cost of going bankrupt is likely to swell the numbers of people falling through the net of the current insolvency regime.
"Our advisers at National Debtline speak to people everyday for whom bankruptcy would be the best solution to their debt problem, but for the fact they cannot afford the associated fees."
For more information, please visit www.glazers.co.uk
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