These bankruptcy firms promise to help get your finances back on track. But you'll pay through the nose first.
Recently we spoke to one person who was in dire situation: he was being hounded by creditors and had little or no surplus income after his priority bills were covered.
He’d originally approached a bankruptcy advice company who asked him to pay £100 per month to them for 13 months, at which point they would then help him with his petition to go bankrupt. This £1,300 was broken down into £700 to the court and the Official Receiver, and £600 to cover the legal fees of the ‘bankruptcy service company’.
The legal fees in question seem to be for filling in a court bankruptcy form on behalf of the client.
Furthermore there was no evidence that the company had even discussed with the client the full implications of bankruptcy or its possible impact on the client’s employment, bank accounts, tax code, property and vehicles. We were shocked when we heard about it.
Those who take advantage of people in debt
Recently we’ve seen with the PPI mis-selling scandal that many companies have suddenly appeared on the market, charging high fees for a service that you can easily do yourself at no cost at all.
These companies often bombard potential clients with unwanted calls, emails and text messages (indeed the the banks have complained that many of these types of claims have in fact never even had PPI in the first place).
This has made the news but there are other companies that charge fees for ‘services’ that you can easily do yourself.
And we’ve found that ‘bankruptcy service companies’ are become increasingly common in the UK since the the credit crunch.
We’re coming across more and more clients who have paid for a ‘bankruptcy advice service’ which often cost them hundreds of pounds. When we ask what the ‘service’ provides it soon becomes clear that it consists of nothing more than filling in the bankruptcy form for the client.
I can’t pay my bills; how can I pay for advice?
The cost of bankruptcy is currently £700: £175 payable to the court and £525 to the Official Receiver. Those are the only fees to pay to enter bankruptcy.
We have a dedicated bankruptcy team that advises clients on what they can expect from going bankrupt, assist in filling in the forms and help in finding ways to reduce fees.
We also work with trust funds and charities to assist clients under extreme hardship in paying the bankruptcy fees. (Funds are very limited and not everyone will be successful, but in the last 18 months we’ve helped clients access over £77,000 worth of grants.)
Personal bankruptcy
For those in debt with a particular set of circumstances personal bankruptcy is often the best debt solution available to them. And it’s true that bankruptcy is sometimes the quickest and easiest way to get debt free.
In most cases bankrupts are discharged after 12 months and most will only pay into the bankruptcy for three years (some will pay less than this) depending on the surplus income that is available.
However bankruptcy is a huge step, a form of insolvency that shouldn’t be taken lightly. Before petitioning for bankruptcy you would be advised to take some free and impartial advice. With personal bankruptcy we would strongly advise that you NEVER actually pay for ‘bankruptcy service companies’.
If bankruptcy is the best advice we will guide you through the process, assist with the form-filling and explain the court procedure. We also offer on-going advice and assistance throughout your bankrupt period. All of this is free of charge.
Start by speaking to one of our counselling team or seek advice using our online counselling service Debt Remedy.