The truth about bankruptcy
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If you need to go bankrupt, you no longer have to attend a court hearing – you can do the whole thing online.
From the 6th April, the Government is making some big changes to the way that you apply for bankruptcy. In this blog, we’re going to look into those changes and also explore when bankruptcy might be the right way to deal with your problem debts.
What are the changes?
The main change is that, from the 6th April, you will no longer have to go to court to apply for bankruptcy – you will just apply online. This will come as something of a welcome change to those facing bankruptcy, as many people find the idea of having to attend court daunting and stressful.
Once you have submitted the online application and paid the fee, your details will go to an Adjudicator (a Government official, employed by the Insolvency Service) and they will tell you whether your application for bankruptcy is approved.
If you need to apply for bankruptcy, you should find that this new system is quick and easy to use – the aim of these changes is to make the process less stressful and more streamlined for users. When the changes come into effect, there won’t be an option to apply through the courts anymore – you will have to use the new online system.
If you don’t want to use the internet, or you don’t have internet access, it may be possible for you to get help from family or friends. If that isn’t an option, you could get help by contacting a debt advisor – like the ones here at Debt Advisory Centre, who will be able to talk to you about what you need to do. There are also debt charities that can provide help, or you could contact the Insolvency Service, or the Money Advice Service.
Is the cost staying the same?
At the moment the total cost of going bankrupt is £705 - split between a court fee of £180, and a deposit of £525. Once these changes come in, the cost will be £50 less, so will now be £655 in total.
Under the current system you can apply for help with the £180 court fee if you’re on a low income or you’re receiving means tested benefits. But, under the new rules, this won’t be possible anymore and you will have to pay the whole £655. So, these changes mean that for some the process will be cheaper overall, but for others it will cost them more as they will have to pay the court fee.
The good news is that, if you need to, you will be able to pay the fee in instalments of as little as £5. Just remember that your application cannot be submitted until you’ve paid the whole £655.
What if I’ve already started to apply?
If you’ve already started your application using the current system, as long as you submit your paperwork before the 6th April, the court will still deal with it for you.
If you start the application but don’t finish it before the 6th April, you will have to start again online, but as we said earlier, you should find this process more straightforward.
When is bankruptcy the right way forward?
Bankruptcy is one way to deal with unmanageable debts in all parts of the UK. In Scotland, the rules are slightly different and the process is known as Sequestration.
Bankruptcy is a way of dealing with insolvency, which is the official term to use when you can’t repay your debts anymore – or you can’t repay all of them at the rate that you originally agreed to. It normally lasts for one year and then, if all goes well, your debts are written off.
Bankruptcy can work very well as a way of dealing with unmanageable unsecured debts in the right situation, but you should consider it carefully. This is because your assets may be sold to help pay some of your debts. This means you may have to sell your home if there is any equity in it.
If your bankruptcy is approved it will be looked after by a Trustee. They look very carefully at how much spare income you have and decide whether or not you will have to pay something towards your debts each month. If you do, you will start something known as an Income Payment Agreement (IPA), which can last for three years. If you do have to pay an IPA, you can rest assured that it will be an amount that allows you to afford all the other essential expenses in your life as well.
The best way to find out whether bankruptcy is right for you is to seek advice from a debt advisor. You can use the options to the left of the page to speak to one of our experts. They can tell you whether it is the right debt solution for you, or whether there’s another way of dealing with your debts that they would recommend instead.
by Christine WalshBack to blog home