Bankruptcy Fee

Citizens Advice is warning that people who are already in financial hardship will face further serious problems because of an increase in the fee for going bankrupt.

The new higher fee is due to be introduced in April and the worry is that it will leave many trapped in debt.

Bankruptcy costs currently include a court fee of £140 and a deposit fee of £250 (which covers the cost of the official receiver).

But the latter will now rise to £310.

Difficult

The Citizens Advice organisation has written a letter to ministers warning them of the effect this will have.

It says many of the people who come into their bureaux will face prolonged misery and a lifetime of harassment by creditors because of the hike in fees.

Claire Kelly, an adviser, explains: "For our clients, raising the £250 deposit fee is very, very difficult.

"Often we have to make applications to charity or clients have to withhold payments from the creditors until they can save up the money to pay the deposit..

"Anything more than that and it's just going to make it impossible for clients to consider bankruptcy as an option."

Necessary

One viewer from Northamptonshire, who prefers not to be identified, told the programme she's just gone bankrupt - but it took her six months to get it.

She couldn't raise the money, and on the day that bailiffs were due to arrive, her mother stepped in and paid the bankruptcy fee on her credit card.

But the Department of Trade and Industry (DTI) says the increase is necessary.

"This increase of £60 is the first rise in ten years in the Official Receiver's costs," it says.

"The deposit does not cover the full cost of administering cases and if this cost was not recovered from the bankrupt it would have to be met from elsewhere."

Alternatives

Citizens Advice maintains that it would like to at least see people on benefit being exempted from it.

"It puts them in a position where they're never going to be able to regain control of their financial situation," says Claire Kelly.

"Often the clients that we see that are filing for bankruptcy have no available income, the creditors won't agree to write the debts off, and will keep pursuing the client and they're living with this constant stress and anxiety all the time."

The DTI says that this year it will be considering alternatives to going to the courts to solve debt problems - and that could include concerns made by Citizens Advice.

And other changes are in store for April, including more flexible rules which will allow people to escape more quickly from the restrictions put on bankrupts.