A reader asked:
I can’t afford to go bankrupt! Is there anyone that can help with the fees?
The bankruptcy fees in England and Wales are £680. This is made up of the £550 Official Receiver’s fee and the £130 application fee.
£680 is just stupidly high – most people go bankrupt because they are broke and they don’t have hundreds of pounds in their bank account. The fees used to be reduced if you were on a low income, but that doesn’t happen any more.
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.
Help from charities
Some utility companies run trust funds that help customers with utility debts and other financial problems, including paying bankruptcy fees.
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.
Other charities may be able to 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, bank workers and many other groups.
Turn2Us has a lot of information on grant-giving charities. Your local Citizens Advice is the best place to get advice and help with this, as they may know of any local charities that only operate in your area.
Save it up
You can pay the bankruptcy fees in instalments, from a debit or pre-paid card. This doesn’t have to be a regular amount per month. If some of the ideas below will get you bits of money, keep putting it away, a bit every month, so you won’t be tempted to spend it.
Stop paying unsecured debts
If you are currently making payments to unsecured loans and credit cards, including payment arrangements or paying a DMP, then you should stop paying these 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. This will only be for a few months until you go bankrupt.
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 loan affordability complaints, which includes a template letter.
Help from a relative
You may not want to discuss your finances with relatives, but if they already know you have big financial difficulties, could you ask for an early birthday present?
Sell things to raise the money
If you have any savings, you will lose these when you go bankrupt, so you may as well use them now to pay the fees. £50 in premium bonds – this is the time to cash them in and add them to the fees.
Most people don’t lose any assets when they go bankrupt – see Will I lose my lawnmower and other bankruptcy questions. But if you do have something valuable that you will lose when you go bankrupt, it makes sense to sell it beforehand to raise the money for the bankruptcy fees. Keep a record of what you sold and for what price.
You need to selling something for a fair second-hand price if a relative or a friend is buying it. Don’t sell your nearly new BMW to your brother for £1,000 – if you try this the Official Receiver will demand your brother returns the car. For a car, if you use the Parkers valuation to set a fair price you will be fine. If you want to sell jewellery to a relative, get an independent valuation first etc.
Even if you don’t have anything “valuable”, you may be able to raise some money by decluttering your wardrobe and house – £65 from a car boot sale, £80 from ebaying things, it can all add up.
Stop paying some bills?
Debt advisors don’t like suggesting that people stop paying essential bills!
But if you are very close to getting the bankruptcy fees together, and not paying a couple of bills will get you to the magic total, you could think about not paying council tax, gas, electricity or water bills.
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.
Same approach for gas, electricity and water. Any debts here will be included in your bankruptcy.
Be 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 or gas and electric debts is going to make your life more difficult.
And don’t miss rent payments!
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.
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.
Don’t give up and choose an IVA instead!
Not being able to afford the bankruptcy fees is the worst possible reason to choose an IVA, where you have to make monthly payments for at least 5 years. Most people don’t have to make any monthly payments at all in bankruptcy.
And about 30% of IVAs fail, leaving you back with your debts. Bankruptcy doesn’t.
Decide if bankruptcy is the better option for you by getting advice from an impartial adviser such as National Debtline on 0808 808 4000 or your local Citizens Advice. If it is, then stop paying your unsecured debts and save up the £85 or £110 a month you would have paid to your IVA towards your bankruptcy fees.