Unfortunately for those struggling with debt, the bankruptcy process comes with its own costs.
Going bankrupt is not free, and help may be needed.
Taking the decision to declare bankruptcy is naturally a huge step to take, and is often seen as a last resort. Whilst it is often the right step to take, to help deal with unsustainable debts, it is important to understand the short-term implications of bankruptcy as well as the long-term ones, and to realise that applying for a bankruptcy is not free and comes with its own costs.
Whilst we have covered elsewhere the topics of assets, property equity and other consequences of bankruptcy, and also the separate rules for Scottish bankruptcy (or sequestration), we also need to consider the fees that come with a bankruptcy application. As alluded to already, these fees apply for England and Wales only.
How much is a bankruptcy fee?
There is a fee to start the bankruptcy process, and it’s not a small amount either. As of the end of 2015 in England and Wales the fee stands at £705. This breaks down into a court cost of £180 and a fee of £525 paid to the Official Receiver – the person who will arrange and manage your bankruptcy, and the bankruptcy estate, if it’s granted.
In Scotland, there is a slightly different process, with different fees – which are lower than in England & Wales. The equivalent process called sequestration comes with a fee of £200. For further details see our section on sequestration.
There is also another option available north of the border called the Minimal Asset Process (MAP), which costs £90 and is for those with very few assets to their name.
A common question asked is – what if I don’t have the money to pay for a bankruptcy?
There seems to be a contradiction in bankruptcy in that the whole point of it is to help people who have no money to pay off debts – yet the process requires more money. Thankfully there is help for some people. Firstly, if you are on benefits, then it is possible that the court fee of £180 will be waived – this is called remission. This will naturally be a great help, but it should be noted that the other £525 fee is never waived, so this always has to be found by a potential bankrupt.
To be eligible for remission, you must:
· be 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
It is possible that someone not fitting these criteria could still be eligible for remission, but sound evidence would have to be supplied to apply for it and be accepted for a waiver. To apply for remission you fill in an EX160 form
What if I’m not eligible for remission?
If you are not eligible for remission, there are still a couple of places you can go to help you with the fees. You should note however that applying for extra assistance may slow down your application, but if it helps you afford a bankruptcy, then it will be worth the delay.
First of all, you should check if there are any charities that may be in a position to help you. A good place to start is the website Turn2Us, which has a searchable database of trusts and charities who may be able to offer help.
Also, 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.
It may be a difficult subject to broach with those you know, but one other alternative is to borrow the necessary amount from friends or family. You should only do this if both sides are comfortable with the arrangement you make.
If you are already in a debt management plan, you could stop payments to help pay for bankruptcy instead. The relevant people should be informed that you are stopping payments if this is the route you choose to take.
One final option is to raise funds by selling assets.
Do I pay the fee if my creditors make me bankrupt?
If you’re being forced into bankruptcy by one or more of your creditors, you don’t have to pay anything. The creditors will be responsible for paying the required fees. Due to new regulations, no individual creditor can push for bankruptcy unless you owe them at least £5,000. As it used to be £750, this makes creditors much less likely to push for bankruptcy.