Cost of bankruptcy to increase by £90 | Chiltern Debt Management

People who are struggling with their debt problems look set to find it more difficult to relieve their debt management, as the cost of bankruptcy is set to rise by £90.

Bankruptcy costs to increase

From April 6 the Government-backed Insolvency Service is raising its bankruptcy petition fees, from £360 to £450.

There will also be an extra court fee of £150 (which can be avoided if the person trying to get out of debt is on benefits), bringing the total cost of going bankrupt to around £600.

The Insolvency Service claimed that it is raising its bankruptcy fees due to the economic downturn, particularly the fall in property prices, as it has meant that they are unable to recover enough money from debtors to cover the costs of allowing debtors to go bankrupt.

A spokesperson for the Insolvency Service said: “The economic downturn has reduced asset values especially property which means a greater proportion of cases don’t generate enough money to cover the fee.

“This has meant that within the overall fee structure, we have had to ensure that more cash is realised earlier in the process. This has led to increases for some but will ensure that the cost of the regime is paid partly by the debtor and partly by creditors.

“Over the last year, the average unsecured debt in debtor petition bankruptcies has been around £33,000. Even with the new higher petition deposit cost, it is not unreasonable to expect those getting the benefit of writing off this debt to pay a proportion of the cost.”

Ivan Cooper, Chairman at debt advice specialists Chiltern, said: “The most important thing to establish is whether bankruptcy is the right option in the first place, hence the need for some impartial and truthful debt help.

“Reputable debt advice organisations, such as Hamilton Locke and Chiltern, are members of leading trade body DEMSA – the ONLY organisation within the debt sector to have received code approval from the Office of Fair Trading.

“This ensures that people who are trying to get out of debt can be certain that they will receive the best standard of service available, and that the advice they receive will be the most appropriate for them.”

Fees & Information

We cannot guarantee a reduction in interest or charges. If an IVA is not maintained it could lead to bankruptcy. Whilst initial debt advice is free, fees will be charged if a solution is taken out.

Fees related to Debt Management Plans are in two parts;

"Initial Fee" means your first two "Monthly Payments", which is paid by You to "Us". This represents our fee for establishing your arrangement, and therefore is not distributed to your creditors, and can be paid in two separate instalments. Retention of this fee will put you into further arrears.

"Monthly Fee" means the Fee payable for our Services each month. This is an amount equal to 17.5% of your "Monthly Payment" (apart from your first two "Monthly Payments" which is the "Initial Fee"), subject to a minimum payment of £30 for disposable incomes of 0 - £100, and £35 for disposable incomes of £100.01 - £200.

Fees incurred for Individual Voluntary Arrangements are variable dependent upon the monthly contribution to the arrangement and the agreement that is reached with your creditors. Fees are made up of Nominees fees relating to assistance given to prepare your proposal and Supervisor fees which relate to the ongoing monitoring of your IVA. Fees are already included as part of your monthly contribution. The level of fees and the method of payment are both agreed by your creditors at the outset of the arrangement.

A record of your agreement with us will be held on your credit file for up to six years, and your ability to obtain credit in future may be affected.

You are provided a cooling off period of fourteen days from the date the agreement was deemed to commence, during which you may cancel our agreement. Should you give notice to us that you would like a refund of a payment, or payments, (being other than the initial fee) then where no distributions have, at that time, been made by us, or are in the process or course of being made by us, in respect of that payment or payments this will be made in full (i.e. without deduction of our fee of 17.5%).