A North East personal finance expert has welcomed moves to reduce the cost of individuals entering bankruptcy, but believes more could be done to help people across the region address their financial difficulties.Neil Harrold, North East chair of insolvency trade body R3 and a partner with Hay & Kilner Solicitors, was speaking after the Insolvency Service announced that government fees for an individual applying to be made bankrupt are to fall from £705 to £655 in April this year.
But with the North East having the highest rate for personal insolvency of any region in England and Wales, Neil Harrold believes more could be being done to help people in the region who are struggling with debt get their finances back in order.
Four of the 20 worst-affected parliamentary constituencies – Washington & Sunderland West, Gateshead, Easington and Wansbeck – are found in the North East, and research carried out by R3 late last year found thatover one third (37%) of people in the region said they sometimes or often struggle to make their money last until payday.
Neil Harrold says: “The government fees for entering bankruptcy can be a real obstacle to people trying to deal with problem debt, so the fall in the cost of bankruptcy petitions is good news as lower fees mean a lower barrier to debt relief.
“While being able to pay fees in instalments is a step in the right direction, we would much rather see the fees paid over the course of the bankruptcy, rather than up-front – people should have to wait to exit bankruptcy until their fees are paid in full, instead of waiting to enter it.
“It would be better for everyone if people with unsustainable debts could access the protections offered by bankruptcy when they need it, not when they can afford it – £655 is a sizeable sum for someone to have to find whether they have debt problems or not.”
The government fees are currently made up of a £525 deposit and a £180 application fee, but the latter is falling to £130 in April as part of the switch from debtor petitioned bankruptcy orders being made by the courts to an online adjudicator system.
A debtor must now owe at least £5,000 to a creditor before that creditor can petition for their bankruptcy, a threshold which was increased from just £750 in October last year after calls from R3 for such an increase, and creditors must still petition the court for a bankruptcy order to be made against a debtor.
Neil Harrold continues: “The sooner insolvent individuals enter an insolvency procedure, the sooner they can rebuild their finances and the sooner creditors can start to be paid back.
“Keeping a close watch on your finances, putting something by whenever you can and getting professional advice on how to start putting things right if you feel your debt levels are getting out of control remains the best course of action for managing your money sensibly.”