Why is it so expensive to go bankrupt?

I have just learnt that from 6 April 2010, the fee you will have to pay to go bankrupt will jump a whopping 25%, from £360 to £450. On top of this, bankrupts also have to pay a £150 court fee.

Although there are exemptions for those on benefits, April’s rise will mean that people struggling with serious levels of debt will be expected to stump up £600 to go bankrupt. 

At a time when insolvencies are running at the highest level since records began back in 1960, this has just got to be total madness. Where is the caring government that professes to help and support the consumer? 

You have got to ask whether this hike in fee has been done deliberately to keep the bankruptcy numbers down – perhaps it’s a ploy to force consumers into other options such as a long-term debt repayment plan, which offer little debt relief and do not appear in the bankruptcy figures?

With unemployment levels expected to climb again this year and more house repossessions likely, there will be an increasing need for people to petition for bankruptcy. Ironically, the fee prevents many from doing so.

I recently helped a lady – let’s call her Jo – who after being diagnosed with cancer was no longer able to work. Without an income, her house was repossessed and was eventually sold for £25,000 less than its true value - leaving the mortgage lender pursuing her for the shortfall, interest and legal charges of around £30,000.

Jo also has £9,000 on credit card debts. If she paid £60 a month into a debt management plan, it would take her 13 years to clear her debt (assuming any interest was frozen). 

However, Jo is struggling to meet even this £60 and is convinced that the underselling of her property has forced her into bankruptcy.

The problem is, with no security and no assets apart from an aging car, she will struggle to find the fee to go bankrupt. Having spent much time in helping her face up to the prospect and stigma of bankruptcy, I now dread having to tell her about this latest fee increase.

We need urgent action to help clear the ‘log jam’ of individuals, like Jo, caught in the limbo of being unable to take effective action to deal with their debt situation.

Instead of increasing the bankruptcy fee, it should instead be reduced in order to enable more to take this course of action and help erase their misery and suffering.

The last debtor’s prison shut 141 years ago in 1869. Society, culture and attitudes have moved on. It’s not a crime to be in debt – so why are people still made to pay such a high price?

According to the Insolvency Service, bankruptcy costs an average of £1,715 to administer (as of May 2009). Part of this cost is met with the current fee.

The Insolvency Service told me that if the bankruptcy fee was scrapped, then funds would have to be found elsewhere – potentially from taxpayers and lenders.

While I can see this is not an attractive prospect for many people who don’t need to go bankrupt, I’m not convinced it's likely.

A lack of support from lenders, coupled with interest charges, often forces people into bankruptcy in the first place. If lenders were forced to pay for some of the cost of administering a bankruptcy case, then they might be keener to help those struggling with debts.


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£600 to go bankrupt? How would anyone in such a financial predicament ever be able to pay for that?

If the lender reposses property, then sells it for less than its true value they should not be able to reclaim this from the defaulter but should stand the loss themselves. In the above example although Jo has lost her house, her outstanding debt would be that of her credit card balance which should be manageable and not require going into bankruptcy.

how do they expect people to be able to afford this ridculous amount, you go bankrupt because you have no money, how do they expect you to get this, sell your body!

I wouldn't get much.

i cannot pay the price to go bankrupt and will be chased and hounded for a long time as i have no other choice

they continue to put court and bailiff cost to me debts but they will never see this money
so they are just chucking away money

but hey that's there choice they can jump and scream as much as they like i cannot pay