Experts have warned that the increased cost of declaring yourself bankrupt has now reached such levels that many people with financial problems can no longer afford to do so.
Last week saw the fee for petitioning for bankruptcy increased by £75, and is not £525. When a consumer adds the cost of the court fee, they are having to pay £700 upfront, often money they cannot afford.
The Insolvency Service defended the increases, claiming that they were needed to cover the increased cost of administration, despite the increase, including the court fees increasing by 37%.
Mark Sands, an Insolvency practitioner from RSM Tenon warned that he felt the increased fees were putting extra pressure on individuals who were already stressed and under pressure from their financial situation.
Sands explained, “So many people flounder around and do not see a way out.”
“They are going to be put off exploring bankruptcy as a solution.”
The £525 initial charge is not the only money taken when managing a bankruptcy. As well as the initial fee, the Insolvency Service also recover a full administration fee of £1,715 minus the deposit from the bankrupt’s assets, or surplus income at a later stage, although the total sum is not being increased.
Deputy head of the Insolvency Service, Graham Horne added, “The fee is staying the same but we are increasing the proportion of that fee which we get on day one,”
The service has also found that in less than half of its bankruptcies is the full fee ever paid, as the falling value of homes and other assets has affected the Insolvency Services assets.
Jon Elwes of the Money Advice Trust explained, “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.”