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.”

JAL in one of Japan's biggest bankruptcy cases

The Japanese airline has sought debt advice in an attempt to reverse the company’s ailing fortunes, with debt problems of around 2.3 trillion Yen.

Plans of restructuring at this iconic airline mean that up to 15,700 jobs may have to go, along with 30 of the airline’s routes.

JAL said that all of its board would resign but that the fleet would still continue to fly on the more profitable routes.

JAL is Asia’s largest airline and the bankruptcy will go down as one of the largest corporate bankruptcies in Japanese history.

Its creditors, which include three Japanese “megabanks”, have said that they will write off debts of around 730 billion Yen – much higher than previously estimated.

The announcement ended weeks of speculation over the airline’s future, after Japan’s new government ruled out an emergency bailout.

The airline will, however, stay in business while it attempts to repair its damaged reputation and return to profitability hopefully before the end of the 2012 financial year.

The Japanese government said it would “provide the necessary support for JAL until the completion of its rehabilitation”.

In a message to shareholders and creditors, JAL apologiesed, saying it wished: “to “sincerely apologise to all of our shareholders, financial creditors, customers and suppliers and other parties concerned for the great inconvenience and concern this situation might cause”.

The report on the Telegraph website also outlined the average amount owed by people experiencing bankruptcy, (or who were on a debt management plan or an Individual Voluntary Arrangement) was £25,115, and showed that almost a quarter of people in debt don’t know how long it will take them to pay it off.

Ivan Cooper, Chairman at debt management company Chiltern, said: “Worryingly, this figure should be surprising but we have had cases where people have developed debts of six figures, and that’s excluding mortgages and other secured debts.

“It just goes to show that my debt problems are left too late, and could be sorted sooner to prevent them escalating to these levels.”

The study also found that people still felt embarrassed to admit that they couldn’t cope with their finances, as one in seven people refused to seek any help at all due to the social stigma attached.