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Entering bankruptcy could be the best way to deal with your debts - but what if you can't afford the £700 fee?
Nobody wants to be in the position of needing to go bankrupt. But, if you have unmanageable debts that you don’t think you’ll be able to pay back in a reasonable amount of time, in some cases bankruptcy may be the most appropriate way to get back onto an even keel. It’ll help ease your financial struggles and give you back some peace of mind.
But, it’s important that you understand the short and long-term consequences of declaring yourself bankrupt, some of which can be quite severe. For example if you own a house, you may be asked to sell it to pay off what you owe. Your credit record will also be impacted, which may make it hard to borrow again for a number of years. But, the upside is bankruptcy does allow you to put a definite end point on your debt troubles, giving you room to breathe again.
It’s also important to note that the advice given here is for England and Wales, so while we may mention our cousins north of the border, the information is not comprehensive. Scotland has different rules, so we’ll cover those in another article. In the meantime, you can read more about the Scottish form of bankruptcy – sequestration – here.
How much is the fee?
There is a fee to start the bankruptcy process, and it’s not a small amount either. At the moment in England and Wales it’s £705. This is made up of a court cost of £180 and a fee of £525 that you need to pay to the Official Receiver – the person who will arrange and manage your bankruptcy, if it’s granted.
In Scotland bankruptcy is a little different, so the fees are different too, much lower in fact. There are two ways to enter bankruptcy north of the border, these are sequestration, which is simply the Scottish name for bankruptcy requires a fee of £200. And the Minimal Asset Process (MAP), which costs £90 and is for those with only a few assets to their name.
Now, we understand that if you’re needing to go bankrupt the likelihood of you having £705 to pay your fee may be small. So what happens if you don’t have the money to pay?
What happens if I don’t have the fee?
If you can’t pay the fee, which is quite likely, as issues with money are the reason why you’re applying for bankruptcy in the first place – there’s still hope. Firstly, if you’re on benefits or have a low income, you may be eligible for a waiver of the court fee, this is called remission. If it’s granted, you’ll be spared having to find £180, however the £525 court fee is never waived, so you will have to find this amount at the very least. But, remission is only available to people in a certain set of circumstances, these are that you:
· are in receipt of working tax credits and certain other benefits
· earn below a certain amount
· only have a certain amount of money left over after you’ve paid your priority bills
If you don’t meet these criteria, but you still feel your circumstances are exceptional enough to deserve remission, say so and provide evidence to prove it too. For example, if you lost everything is a fire, you could still be awarded remission even if you didn’t meet the criteria above.
To apply for remission you fill in an EX160 form, which you can download from the government’s court website, Justice
What if I’m not eligible for remission?
If you’re not eligible for remission, don’t worry, there are still a couple of places you can find help with the fees. Although applying for extra help from any of these places may add additional time to the processing of your bankruptcy application.
First you should see if there are any charities you can approach – there are lots to choose from, you just need to find the most appropriate one for you. A good place to start your hunt is the website Turn2Us, which has a searchable database of trusts and charities who may be able to offer help.
And don’t forget about charities that are for members of a certain profession. For example, if you were in the armed forces you could approach the SSAFA – the forces charity, for help.
Other ways you could rise the fee
While these may not be appropriate for your situation, here are a couple of other ways you could think about raising the fee. If you are happy and comfortable talking to a relative or friend about your situation, you could ask them for the money. If not, you can try to save it up by stopping payments to any debt management plan or IVA already in place. You should let the lender know that you intend to go bankrupt and that’s why you’re stopping payments. At this late stage in the game, a further default will be neither here nor there. And finally, you could try to raise the money by selling clothes or other things you have that you don’t use.
Do I pay the fee if my creditors make me bankrupt?
If you’re being forced into bankruptcy by one or more of your lenders, you don’t have to pay anything. The lender will be responsible for paying it all. New rules introduced this month mean any individual lender cannot make you bankrupt unless you owe them £5,000 or more. It used to £750, so this is a significant jump and, unless you have a significant amount of assets that can be sold off to pay back the debt, the lender may be less likely to bother.
So, not having the fee to pay for bankruptcy is not the end of the road, it’s just the beginning of another search to find someone who can help. As we said, it’s important to remember that all debts solutions have both up and downsides. You can find out more about how bankruptcy will affect you here.
If you think you need to talk to someone about your debts, a good place to start is with the Money Advice Service. Their help is free and completely impartial. You can also call us, we have trained debt advisors ready and waiting to help, just choose one of the ‘contact us’ options on the left.
by Shelley BowersBack to blog home