A reader asked “I can’t afford to go bankrupt! Is there anyone that can help with the fees?”
From April 6 2016, the bankruptcy fees in England and Wales are £655 (£525 Official Receiver’s fee and £130 application fee). This is just stupidly high – most people go bankrupt because they are broke and they don’t have hundreds of pounds in their bank account. If you were on a low income, you used to be able to only pay part of the fees, but from April 6 this help no longer exists.
If you are struggling to get these fees together, this page looks at your options. How to pay your bankrupt fees looks at the mechanics of actually making the payments.
Save it up
If you are currently making payments to unsecured loans and credit cards, including paying a DMP , then you should stop and save this money up. If you get cross letters and calls from your creditors, tell them you are taking advice on your debt options.
You can now pay the fees in installments, so if you are worried that you won’t be able to save money for the fees without dipping into it, this could be a good option for you.
Use your credit / debit card
You can now make online payments to your bankruptcy fees from a credit, debit or pre-paid card. So if one of your cards or your overdraft isn’t maxed out, this could be used for some or all of the fees.
If you have any valuable assets that you will lose when you go bankrupt, it makes sense to sell them beforehand to raise the money for the bankruptcy fees. Keep a record of what you sold and for what price.
(NB You need to be careful that you are selling them for a fair price if you are selling something to a relative or a friend. You can’t sell your two-year old Porsche to your brother for £1,000 – if you try this the Official Receiver will demand your brother returns the car – but if you use the Parkers valuation you will be fine. If you want to sell jewelry to a relative, get an independent valuation first etc.)
Help from charities
Many utility companies run trust funds that help customers with utility debts and other financial problems, including paying bankruptcy fees. The following is a partial list: British Gas, EDF Energy, Thames Water, NPower, United Utilities.
Some of them won’t consider applications if you are a homeowner or if you have been bankrupt before. Your local Citizen’s Advice will be able to sort out which ones are appropriate for you. Most of them prefer the application form to come from Citizen’s Advice not you personally, as they need to know that you have had good debt advice that bankruptcy is a suitable option for you.
There may be other charities that can help. Sometimes these are local, sometimes you may be eligible because of your current or previous careers, for example SSAFA helps people who have served in the armed forces (including National Service) and their families. There are specific charities for people who have been civil servants, postmen, nurses, shop workers and many other groups.
Turn2Us has a lot of information on grant-giving charities but again your local Citizens Advice is usually the best place to get advice and help with this, as they may know of any schemes that only operate in your area. There is a list here that may be helpful.
If you haven’t tried to get PPI refunds, you should definitely try this as any refunds that come to you can be used to pay bankruptcy fees. This is worth doing even if you don’t remember having had any PPI – it was sometimes added without you realising. If you wanted the PPI, it’s still worth reclaiming, as the policy may not have been what you thought it was and you may never have been able to claim on it! Find out details about how to do this yourself – it’s now simple and there is no need to waste money by using a PPI reclaim firm.
Get a payday loan refund
If you have had any payday loans, even ones that were repaid in full and on time, it is possible that these were “not affordable” – if you complain then you may get a refund of interest and charges which could all go towards those bankruptcy fees. See the article on payday affordability complaints, which includes template letters.
Help from a relative
You may not want to discuss your finances with relatives, but if they already know you have huge difficulties, then could you ask for an early birthday present?
Stop paying council tax
The current year’s council tax is included as a debt in bankruptcy. It is normally a very bad idea to not pay council tax as councils take you to court faster than any other creditor and then you have bailiffs calling. However, if you are ready to go bankrupt and the money you would have paid to the Council this month will be enough to have the bankruptcy fee paid, then not paying this month would be a good idea. If you have never had council tax arrears before, you could consider missing two months payments.
Be very careful about doing this – if you change your mind about bankruptcy, or something crops up and you have to delay going bankrupt, then having council tax arrears is going to make your life more difficult.
Don’t wait for a creditor to make you bankrupt
This isn’t likely to happen. Unless you have a lot of assets, a creditor who makes you bankrupt will get nothing, because the Official Receiver’s costs have to be paid before any money goes to creditors, and these can be extremely high. So unless you have a house with a lot of equity (in which case you should be looking to sell the house, not go bankrupt at all) the only creditors that will sometimes make you bankrupt are HMRC and local councils – and even if you owe them a lot you can’t rely on this happening.