How Much Does It Cost to Go Bankrupt in the UK?

Navigating personal bankruptcy in the UK involves understanding various financial outlays. This process, while offering debt relief, comes with specific costs. These expenses include initial application fees, charges from the Official Receiver who manages the bankruptcy, and potential costs for professional guidance. The financial commitment varies based on the specific fees and how they are covered.

Official Bankruptcy Application Fees

When an individual petitions for bankruptcy in England and Wales, certain upfront fees are required. The total cost to apply for bankruptcy is currently £680. This amount comprises a £130 Adjudicator’s fee and a £550 bankruptcy deposit. The Adjudicator’s fee covers administrative functions performed by the Adjudicator’s Office in considering the bankruptcy application.

The bankruptcy deposit, which is the larger portion of initial fees, contributes towards the costs of administering the bankruptcy process. This deposit helps to cover the work of the Official Receiver. The Adjudicator’s fee is generally non-refundable once the application is submitted.

Applications are typically submitted online through the official government website. During the online application process, individuals can make payments using a debit, credit, or prepaid card. These fees can be paid in installments, with a minimum payment of £5, though the full £680 must be paid before the bankruptcy application can be formally submitted. If an individual chooses to pay in cash, the entire amount must be paid in a single transaction, as installment payments are not available.

Official Receiver Fees and Expenses

Once a bankruptcy order is made, the Official Receiver (OR), an officer of the Insolvency Service, takes control of the bankrupt’s affairs. The OR investigates the bankrupt’s financial situation, realizes assets, and distributes funds to creditors. Costs associated with the OR’s work are distinct from initial application fees.

Several fees and expenses are incurred by the Official Receiver during a bankruptcy case. A fixed General Official Receiver’s fee is charged in every case to cover standard administration costs. This fee is currently £6,000, increasing to £7,200 from January 9, 2025. An Official Receiver’s administration fee is also applied: £1,990 for a debtor’s application and £2,775 for a creditor’s petition. These amounts will rise to £2,390 and £3,300 respectively from January 9, 2025.

If the Official Receiver acts as trustee and realizes assets, a further fee of 15% of the asset value realized is charged, with no maximum limit. If an Income Payment Arrangement (IPA) or Income Payment Order (IPO) is set up, involving regular income contributions, a one-off £150 fee covers setup costs. These fees and other OR expenses, such as for asset valuations or sales, are typically paid from funds generated by selling the bankrupt’s assets.

Costs of Professional Advice

While individuals can apply for bankruptcy without professional assistance, many choose to seek advice from solicitors, debt advisors, or licensed insolvency practitioners. These professionals can offer guidance on the suitability of bankruptcy, assist with the application process, and provide insights into the implications of the bankruptcy order. Engaging such services involves additional costs that are separate from the statutory fees.

The costs for professional advice are not fixed and depend on the advisor’s fee structure and the extent of the services provided. Many professionals charge on a time-cost basis, meaning their fees are calculated by multiplying hours worked by hourly rates. Hourly rates can range from approximately £120-£175 for administrative staff to £375-£650 for partners or senior insolvency professionals. Some advisors may offer fixed fees for specific services, particularly for straightforward tasks like initial consultations.

For complex insolvency procedures like Individual Voluntary Arrangements (IVAs), professional fees might include a nominee fee for setting up the arrangement, typically ranging from £1,000 to £3,000. Ongoing supervisor fees for such arrangements can represent a percentage of monthly payments made throughout the term. Rules introduced in 2015 require insolvency practitioners to provide upfront estimates of their charges and the work to be undertaken, promoting transparency for individuals seeking their services.

How Bankruptcy Costs Are Paid

The funding mechanisms for bankruptcy costs depend on the type of fee. The initial application fees, comprising the Adjudicator’s fee and the bankruptcy deposit, are primarily the responsibility of the individual petitioning for bankruptcy. These fees must be paid in full before the application is submitted. Payment is commonly made through the online application system, which allows for either a single payment or installment payments until the total amount is reached.

Conversely, the fees and expenses incurred by the Official Receiver during the administration of the bankruptcy are generally paid from the realization of the bankrupt’s assets. This includes the General Official Receiver’s fee, the OR’s administration fee, the trustee/liquidator fee (if applicable), and any IPA/IPO setup fees. The initial £550 bankruptcy deposit contributed by the applicant helps to cover these administrative costs.

In cases where the bankrupt’s assets are insufficient to cover the Official Receiver’s fees, those fees may not be fully recovered. The Insolvency Service aims to ensure that the costs of administering insolvencies are met, partly through these fees, to limit the burden on taxpayers. Any costs associated with seeking professional advice, such as from solicitors or debt advisors, are typically paid directly by the individual to their chosen advisor, separate from the statutory bankruptcy fees.