Should the cost of bankruptcy vary by individual?

Should bankruptcy costs be a flat fee or vary according the debt incurred? POLL

This week, the Business, Innovation and Skills Committee published its inquiry into the Insolvency Service.

Among other observations into resourcing issues at the Insolvency Service, one highlight worthy of greater attention, was the conclusion with regards to the current official receiver’s administration bankruptcy fee which in England and Wales is currently £525.

Bankruptcy costs 2013, going up?

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Individuals in England and Wales voluntarily seeking to declare themselves bankrupt are currently required to pay:

  • £525 bankruptcy fee
  • £175 court fee

Creditors are entitled to petition bankruptcy proceedings against individuals starting at the £750 debt level.

In 2011, ClearDebt blogged about this level and a poll showed a strong desire to see this level rise with differing opinion among debt professionals.

The £525 fee has infact rised substantially in recent years, the report indicates that:

the deposit fee was raised in June 2011 from £450 to £525, having been £345 in April 2008.

It would appear from the findings of BIS, that some sort of increase and a sliding scale of bankruptcy administration costs is likely to be formulated.

However, it should also be noted that

We [BIS] also agree that the fee should not be automatically required to be paid up front but could be staggered along similar lines as payments to debt management companies.

Spreading the cost of bankruptcy with instalment payments removes a previous barrier to many for this debt option. However at this stage, it is unclear how the costs of bankruptcy may differ or be capped for someone with £25,000 or £180,000 of debt.

Flat fee or vary by individual?

So the question is, do you think the costs of going bankrupt should be the same across the board or should it vary by individual debt?

Should the high flying failed venture owner pay the same as the man in the street?

Is the option of bankruptcy instalments a welcome one?

How might a radical change in the cost of  becoming bankrupt affect choices available to people in debt?

Vote now in the poll on this post and join in the comments below.

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Comments:3

  1. I think that Debtors petition fees should be on a variable sliding scale dependent on the deficiency of the debtor at the time of filing of the bankruptcy petition. I also believe that the court fee charged should also be varied on the same scale.

    An example of the variable rates that could be charged is shown below –

    Deficiency/ Est Petition Fee/ Est Court Fee

    0-20k /£250/ £100

    20k – 40k /£375/ £125

    40k – 75k /£525 /£175

    75k – 150k /£700 /£200

    150k – 300k / £900 /£250

    300k+ / £1,200 / £300

    This might make debtor more proactive in dealing with there debts sooner rather than later or the actual costs of dealing will increase.

    1. I don’t have the IS figures to hand but you’re suggesting @google-5172b637536616e37dbde658f85ebca4:disqus a defacto reduction in fees for anyone with less than £40k of debt. Based on the report findings, that is highly unlikely to happen, no?

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