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R3 comments on bankruptcy cost increase

Insolvency trade body R3 (the Association of Business Recovery Professionals) has commented on the upcoming increase in the cost of going bankrupt.

"Save up to go bust?" asks R3`s President, Peter Sargent, explaining that, "With the Insolvency Service raising bankruptcy costs by £90 the price of going bust has never been so high, standing at £600 all in, including court fees."

Even so, he points out, the cost of bankruptcy must be seen in context. It`s still `value for money` for the borrower, given that £600 works out at just 2% of the average borrower`s unsecured debt: £33,000.

He also acknowledges that the cost increase was designed "to ensure that bankruptcy costs don`t come out of the public purse and fund the Insolvency Service, which has never seen such a high demand for its `unwanted` services".

In fact, even £600 doesn`t cover the costs. It costs the Insolvency Service £1,715 to administer and investigate a bankruptcy - a cost that isn`t always met through `asset realisations`.

Mr Sargent also notes that bankruptcy isn`t the only form of insolvency which can help people in debt. A Debt Relief Order (DRO), for example, costs under £100, although DROs can only help people who meet the strict criteria.

While DROs are only available to borrowers with debts of £15,000 or less, IVAs may be able to help those with more significant debts which they can`t realistically expect to repay in full.

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The IVA Advisory Centre are a licensed Insolvency Practice, offering free debt advice as well as IVAs and a comprehensive range of other debt solutions. If you are in debt and would like to explore your options, contact one of our advisers today.