Changes to Insolvency Fees

The amount which the official receiver will be charging in cases of bankruptcy are changing from today.

 

In 2014, the Insolvency Service decided that it would carry out a full review of its funding, including that of the Official Receiver Services.

 
This review was requested by Ministers at the Department for Business, Innovation and Skills and the Treasury, to make the funding for Official Receivers Services more transparent. 
 
It has identified that fees should be set at a level which aims to achieve full cost recovery of bankruptcy. The fee structure is set up so those who benefit from the insolvency regime pay for it, rather than the taxpayer. The new set of fees being introduced aim to do this by ensuring the costs match up to the activities being carried out.
 
When are the changes to the fee structure and increases to deposits and existing fees being introduced?
 
The new fees only apply to cases where a bankruptcy application (when the debtor applies) is made or a petition is filed in Court (when a creditor applies) for a bankruptcy order on and after the commencement date of the 21 July 2016 (today). Cases where a petition was presented before the 21 July 2016, but the order is actually made on or after today will not be liable for the new fees.
 
So what are the new fees?
 
The Official Receiver’s general fee
 
This new fee replaces the Secretary of State Fee. The previous Secretary of State fee was charged as a percentage of assets in a case, whereas the new fee is a single one and will be set at £6,000 and therefore there should be more funds available to return to creditors in cases with assets
 
The Trustee / Liquidator fee
 
This fee will be charged in cases where the Official Receiver acts as Trustee or Liquidator and there are assets in a case. The fee will be 15% of assets realised. This only affect the debtor in cases where there are assets left over after the debts and other fees are all paid off. 
 
The Income payments agreement (IPA) / Income payments order (IPO) set up fee
 
This fee will be charged in all bankruptcy cases where an IPA or IPO is set up. 
 
The introduction of a new fee of £150 for setting up an IPA/IPO is going to come from money paid into the bankruptcy by the debtor, but it will go to the Official Receiver instead of creditors, meaning there’s no direct impact on the debtor. 
 
This fee will only be charged once on a case, even if a debtor defaults on their payments under an IPA, and the Official Receiver makes application to Court to enforce payments via an IPO.
 
The Dismissed / Withdrawn petition fee
 
This £50 fee is introduced to cover the costs of the Official Receiver’s admin when issuing a refund to whenever a petition is dismissed or withdrawn. It will be deducted from the petition deposit before it is refunded.
 
The debtors’ bankruptcy deposit
 
This is an amount payable on presentation of the petition to help pay for the costs of the administration of the case and will be increasing by £25. 
 
What’s the alternative to bankruptcy?
 
The Government introduced Debt Relief Orders in April 2009 to meet the needs of those overwhelmed by relatively low levels of debt and is a low cost option. Debt Relief Orders have many of the same advantages as bankruptcy, but you must owe less than £20,000 and have a low disposable income. Your non-vehicle assets (including savings) can't exceed £1,000 and your car value can't be in excess of £1,000.
 
Individual voluntary arrangements (IVAs) are also available to those who can make payments towards their debt. It is a legally binding agreement between you and the people you owe money to where interest and charges are stopped on your debts and you pay back what you can reasonably afford each month.
 
There are claims that you can write of 90% of your debt this way but in reality, an IVA will only write off between 50% and 60% of an average debt of just under £60,000. 
 
If you're thinking of entering into bankruptcy or any other insolvency agreement please call us on 0800 043 40 50 for further advice.