The truth about bankruptcy
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Learn how much it costs to go bankrupt and how to manage if you’re having trouble finding the money.
If you’re looking at bankruptcy as a way to deal with your unmanageable debts, you’re probably wondering how much it’s going to cost you.
That’s why in today’s blog, we’re going to explain what the cost is for and also whether you will need to pay anything towards your debts while the bankruptcy is ongoing.
If you’re a Scottish resident you will need to look into Sequestration instead, which is the equivalent of bankruptcy north of the border. If this applies to you, have a look at our dedicated page on Sequestration.
How much does it cost?
Altogether, it costs £655 to go bankrupt. This is the combined cost of the adjudicator fee of £130 plus £525, which covers the cost of administering your bankruptcy.
You’ll need to pay the £655 in full before your bankruptcy can be processed, but it is possible to pay this amount in instalments.
How do I apply for bankruptcy?
From the 6th April 2016, the way to apply for bankruptcy changed so that you don’t have to go to court and you can now complete the whole process online. When you apply online, you can choose to pay in instalments of as little as £5 if you need to.
Our blog on going bankrupt without going to court will give you a thorough overview of the new system.
Can I get help with the bankruptcy fees?
Under the old system, you could apply for the £180 to be waived if you were on a low income or means tested benefits. This is no longer the case and, as we said earlier, you will have to pay the whole amount it costs to go bankrupt before your application can be processed.
It might still be possible for you to get help with the cost. Paying in instalments may solve the problem for some people, or you might be able to get help from a debt charity. You can use Turn2us to find out whether a grant is available to help you.
It’s a little known fact that some energy companies also run schemes to help people cover the cost of bankruptcy and other solutions that deal with insolvency, including British Gas and EDF Energy. Each supplier has their own set of rules when it comes to eligibility for help, so check the website carefully.
Is there an ongoing cost for bankruptcy?
With bankruptcy, you are sometimes expected to pay something towards your debts each month, known as an Income Payment Agreement (IPA). Your Trustee – the person who oversees your bankruptcy – will take a close look at your finances and see whether you can afford to do this.
An IPA normally lasts for three years in total, but it will always be based on what you can afford after all your other expenses have been accounted for and you won’t be expected to pay anything at all if all your income comes from state benefits.
Are there cheaper options?
A Debt Relief Order (DRO) is a cheaper alternative to going through bankruptcy at £90 and if you qualified for this solution we won’t then recommend that you go bankrupt. You won’t ever be expected to put anything towards your debts each month with a DRO either.
There are some strict requirements you’ll need to meet to qualify for this solution. You can’t:
• have assets worth more than £1,000,
• owe more than £15,000 in unsecured debt,
• have a car worth more than £1,000 unless it’s essential, or
• have more than £50 spare to put towards your debts each month.
Is bankruptcy the best way forward?
Bankruptcy can work well for some people and be the very best way for them to gain control over their debts. Having said that, going bankrupt is not a decision you should take lightly and it will have certain effects on your life, some of them negative. For this reason, we normally advise that you consider bankruptcy only when none of the other solutions are available to you. For more information on how the solution works, and its positive and negatives effects, have a look at our bankruptcy page.
You don’t have to make any decisions about debt solutions alone. In fact, it’s key that you get help. The very best way to find out which debt solution is for you is to seek professional advice. Our advisors are trained experts in recommending the best solution. While there are fees associated with some debt solutions, the initial advice we give will always be free of charge.
by Christine WalshBack to blog home