The Insolvency Service has announced there will be a 7% reduction in the cost of entering a bankruptcy.
The government fees for an individual applying to be made bankrupt are to be reduced to £655 from £705. The fall in cost of bankruptcy petitions is good news. The government fees for entering bankruptcy can be a real obstacle to people trying to deal with their debt problem. The lower fees could be less of a barrier to individuals seeking debt relief.
These changes are certainly a step in the right direction; enabling an individual to pay in instalments over the course of the bankruptcy is often an easier than a single payment upfront. The logic behind this change is people should have to wait to exit bankruptcy until all the fees are paid rather than wait to enter it. There is greater benefit for those in needs to access assistance and protection when they need help rather than when they can afford it. £655 is a considerable amount of money for an individual to find regardless of their debt problems. The sooner an individual is able to enter the insolvency process and access protection, the sooner they will be able to rebuild their finances and the faster creditors can be paid back.
The government fees are made up of a £525 deposit and a £180 application fee. From April, the application fee will fall to £130 as part of the switch from debtor petitioned bankruptcy orders being made by the courts to an online adjudicator system. Creditors must still petition the court should they wish a bankruptcy order to be made against a debtor. A debtor must now owe at least £5,000 to a creditor before that creditor can petition for their bankruptcy.