Debtors ‘should be allowed to pay bankruptcy costs in instalments’

The majority of personal insolvency experts believe debtors should be able to pay their bankruptcy costs in instalments.

Trade body R3 has called for the £700 charge to be spread across a longer period of time. This is to allow more people to declare themselves bankrupt and escape their potentially crippling levels of debt.

R3 stops short of calling on the fee to be waived completely, however, as it believes it is important a cost is attached to the process which can see people protected from creditors. Currently, the charge is split between £175 that goes to the court and £525 which is paid to the Insolvency Service.

According to statistics, 70 per cent of personal bankruptcy experts believe that allowing more flexibility in paying the charges would enable further take-up of the scheme and help people get their finances back on track. 

In addition, analysts have called for alternatives such as debt relief orders (DROs) to be enhanced so they could provide assistance to more debtors. They were initially created as a cheaper method of achieving protection from creditors, however practitioners state the vast majority of people are ineligible to benefit from them.

This is because they are only available to those who are less than £15,000 in debt and have assets of less than £300. As a result of this, two per cent of insolvency experts reported their clients were able to secure DROs. 

A further six per cent of respondents said they had enabled customers to seek individual voluntary agreements, or IVAs. These are legally-binding contracts to pay off debts within five years. 

Stuart Frith of R3 commented: "Regardless of whether an individual got into debt through reckless spending or through no fault of their own, the insolvency regime needs to make all options available according to the circumstances of each case."

Meanwhile, the number of people seeking insolvency measures fell during 2103, compared to the year before. Despite this positive news, figures showed the uptake of such schemes was above the 100,000 mark for the eighth year running.

By Amy White