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The Cost Of Bankruptcy Set To Rise In The Uk

Bankruptcy is often the right solution to resolve a serious debt problem but an increase in cost due in April is likely to preclude many who are most in need.

If you declare bankruptcy, all your debt will be taken away. Your creditors can no longer hassle you with collection phone calls and letters and all legal action against you is stopped.

Contrary to popular belief, you will be able to keep all of your household items (unless you have some particularly valuable antiques) and you will not have to make monthly payments towards your debts unless you can afford to do so.

If you are renting, particularly from a social landlord, and declare bankruptcy, it is extremely unlikely that your home will be affected.

So why would you choose to avoid this option?

Costs preclude those in need

Over 30% of households in the UK rent their property from either a social or private landlord. Many of these who are in serious debt would consider bankruptcy but are prohibited from doing so because of the cost.


This cost of declaring bankruptcy in the UK is currently £510 split between a court fee of £160 and £350 towards managing the bankruptcy process. For many people on low incomes £510 is just too much to find.

One of the ways to pay for Bankruptcy is to “save” up the fee by making no further payments to creditors. However, if you are only able to put aside £100 or less a month, it will take 5 months or more to get the sum you need. This is five months of constant pressure and threats from creditors.

To make matters worse, in April 2010, the cost of bankruptcy in the UK will increase by £90 to £600. This is surely only going to prevent more people who should be using the procedure from doing so.

Debt relief orders

In 2009, new legislation was introduced to help people on very low incomes. A debt relief order (DRO) is a form or bankruptcy which is reserved for people who can only afford to pay £50 a month or less towards their debt. The cost of implementation is £90.

However to qualify for a DRO, your assets including any pension fund must be less than £300 (your car can be worth up to £1000) and your debt must be less than £15,000.

Unfortunately these criteria are so tight that they preclude many people who are then left to try and save the money required for bankruptcy. Often they are unable to do this and so face a long struggle with their debt.

The bankruptcy process is the right solution for many people who have serious debts – especially those who rent their home. However, the costs involved prevent them from undertaking this solution and resolving their debt problem.

Unfortunately, the anticipated increase in the cost of declaring bankruptcy in the UK will only make things more difficult for many who are most in need.

Steve Jackson is a debt adviser from in the UK. For more quality and unbiased information on Personal Debt Solutions, visit our website at


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