When people find themselves in debt it can be an extremely difficult time, and quite easily they can find that their debt escalates and spirals totally out of control. At first faced with debt people tend to borrow from Peter to pay Pan, but eventually Peter runs out of money too! Most individuals in this situation find that their credit rating drops also due to missed payments. To keep their heads above water, they can then end up ultimately turning to extortionate lenders to try to keep their current debtors at bay. This only exacerbates their situation. These lenders, for example Pay Day Loan companies or similar, can seem like an easy option at the time as the money is usually put in their bank instantly. This however is only a temporary relief. Due to the exorbitant charges and interest rates these companies charge it just pushes people deeper into the mire. Eventually most find themselves in such a mess, they simply have nowhere at all left to turn. The only solution being; to go bankrupt.
The majority of people faced with this situation do not relish the thought of bankruptcy, it still holds a degree of shame and degradation. Most people that turn to bankruptcy do so out of desperation, they really can no longer cope. Many are not in this situation through fault or choice, the majority of the time it is just quite simply unforeseen personal circumstances. This can be due to redundancy, divorce and many other unexpected situations. When faced with this completely desperate situation, and left with no alternative, but to go bankrupt then comes the irony! In order to do so they are expected to pay £700! For people who are struggling, and up to their eyes in debt this may as well be a million pound! The answer will always be the same, they simply cannot afford to pay this amount of money!
So what is the solution?
These people are between a rock and a hard place, there appears to be no way out! The actual bankruptcy fee of £700 which applies to the UK and Wales comprises of £175 for the Court Fee and £525 for the Official Receivers Fee. In Northern Ireland the fee differs slightly in that the Court Fee is £115, the Official Receivers Fee is the same at £525, and there is a £7 Solicitors fee. A seemingly impossible amount! However there are answers.
If you cannot afford to pay these fees there is an alternative. If you have unsecured debts of £15,000 or less, no assets that exceed £300, no mortgage and a disposable income of less than £50 you can apply for a Debt Relief Order (DRO) instead of Bankruptcy. This is the ideal as it only costs £90 as opposed to the £700 for bankruptcy, and this can be paid in instalments.
If you do not meet the criteria for the DRO, then you are still faced with the real hardship of finding the £700 to go bankrupt! The majority of people going bankrupt are in dire financial circumstances and certainly will not have this money to hand, nor have the ability to save this amount.
What other solutions are there?
The preferable solution would be always not to go bankrupt; if this is at all possible. In the first instance always obtain advice from a recognised source for example the Citizens Advice Bureau. They may be able to resolve your situation by negotiating with your debtors amicably, and coming to a suitable agreement between both parties to pay monies owed to them back in small instalments. Many people find that when they do this, things are not quite as bad as they initially thought!
If this is definitely not an option the next step would then be to try and borrow the money from family and friends, however again this is not always possible. Friends and family, even if they do have the money, may be reluctant to lend you given the circumstances and your financial status.
What if my only option is Bankruptcy?
If given all of the above you still have no alternative then in the first instance, if you qualify, apply to have the court fee waived. If you are on a low income or on certain benefits the court fee can be waived, however the Official Receivers fee will still have to be paid. To do this you would need to obtain, complete and return the form EX160 to the court clerk along with the required evidence.
The next step is finding the Official Receivers Fee. Trying to raise this amount of money in this situation can seem like an impossible feat, but there are solutions:
• If you have any valuable assets at all sell these to raise the money, however keep the receipts as you most probably you will have to account for, and explain, this to the court.
• Check all your old cupboards at home, many people are surprised at what they find and what they can sell! Things that have been lying there for years can surprisingly now be of some value. Sell everything and anything you do not use on Ebay or Gumtree, or have a Car Boot Sale. You will be astonished at how much money you can raise by doing this.
• Check your local area for Charitable Trusts, many charities can and will help you. A list of local charities should be relatively easy to find online, or ask if they have a list at your local CAB (Citizens Advice Bureau)
• Check with your utility companies. Companies that supply your Water, Gas and Electric often have their own trust funds and will accept applications for help with bankruptcy fees. Generally this money does not have to be paid back.
• If you are or were a member of a Union check with their welfare officer, quite often they can assist too.
• Save it up. Try to prioritise your money, cut back and sort out non-priority debts. If necessary stop paying non-priority debts and inform the companies that you are filing for bankruptcy.