A report by the Department of Business, Innovation and Skills (BIS), has stated that in some cases, the cost of bankruptcy is now greater than the amount of debt accumulated in the first place.
Some individuals who resort to declaring bankruptcy may face expensive charges that total a higher amount than the debt they start with. If an individual is in debt of £750, he/she can be made bankrupt but with accountants charging up to £800 an hour, the individual is in greater debt immediately.
Kerry Katona has publically spoken out about her bankruptcy costs in the past, admitting her original debt of £82,000 (due to unpaid taxes) had leapt to £430,000 because of legal and accounting fees.
It’s been suggested by debt management charities that the bankruptcy process is unfair as individuals are unable to choose who they wish to be represented by, which could lead to overly expensive costs.
Furthermore, if the individual wishes to complain about the fees charged, this may only take longer for the case to be resolved, increasing costs.
It’s important to note that some cases are extremely complex and individuals must be treated equally and fairly.
The department of Business, Innovation and Skills will be making a statement on this issue later in January.