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Bankruptcy & Benefits

by The Bankruptcy Service

Posted on September 29, 2014 at 12:00 AM

Bankruptcy & Benefits

A look at how bankruptcy affects those on benefits.

For those on benefits (or for that matter low income) with debts exceeding £15,000, bankruptcy is definitely the best option for dealing with unsustainable debt, as you will not be placed in an Income Payments Agreement (IPA), which would distribute surplus income to creditors over a sustained period, most probably 3 years.

The problem is that a bankruptcy is not free, costing money to process, which proves troublesome when it is used by people who by definition do not have much, or any money. There is some possibility of help, as the £180 court fee can be waived for those on benefits or a low income, by submitting a request to the court. However, that still leaves a further £525 fee.

Help can be received here too however. There are numerous companies and charities that have schemes that can help cover costs for those facing bankruptcy. Some examples are:

Severn Trent Trust Fund
EDF Energy Trust
Royal British Legion
United Utilities Trust Fund
Various Trade Unions – visit the Trade Union Congress (TUC) website
Union Finder from Worksmart
British Gas Energy Trust
Macmillan Cancer Care if you or a family member has cancer

Applications can take time, and you may need the assistance of an experienced financial expert, but not in all cases. However, the above organisations may also help with other costs, such as paying bills, so it’s worth keeping that in mind too.

Another option is to arrange for someone to pay your fees for you. If a friend or family member does this, be careful not to mention where the money to pay for fees has come from, as it could then be included as a debt for a creditor.

If you are on benefits, you will need to take to court a benefits letter that is under 30 days old, to show that you are not in employment, and to show what you receive instead.

Free debt counselling and advice is also available from the Money Advice Service available at: doesn't charge a fee for its bankruptcy service, but receives remuneration from the partners that we work with in order to keep operating. Those partners must charge a fee to the customer to likewise cover operational costs, and this amount will vary depending on the solution offered, and the terms of the parner. For details of these terms, please refer to the website of the organisation dealing with your bankruptcy. Upon application with, we will forward your information on to one of our specialist debt partners. You will then be contacted, and you will be able to explain your case, and expert advice will be offered in order to ascertain the most appropriate debt solution.