Why pay fees for a debt management plan? See how much we could save you
A fee charging debt management company is a firm that will charge you for debt advice and debt service. They usually take the first two months’ payments into your plan as upfront costs followed by 15% of your monthly payment plus VAT. The New Protocol launched in February 2013 will mean that the up front fees will be taken over six months. See Debt Management Protocol
There are some good fee charging firms operating in the debt industry and if you are happy with your firm then fine. However there are some shockers out there and we have the following guide to help you spot them, see our 7 point guide to spotting a dodgy debt advice website!
If you are thinking of starting a debt management plan or wish to transfer to a 'non' fee debt management plan and not pay fees then see how much we can save you by using the slide bars on our unique fee saving calculator above.
Page last updated Monday, 13 January 2014
Before going bankrupt you must have explored ALL your options. Get confirmation that bankruptcy is the ONLY option left to you. We have a list of the most common Q & A's on bankruptcy.
You can also get free debt advice here.
Free Bankruptcy Support from the DebtWizard
If bankruptcy is for you then why pay a firm between £500 and £1,000 for them to help filling out the bankruptcy forms? We show you how to do it for free, what to expect at court and what to say to your creditors, plus lots more!
Our 'bankruptcy support' section will help guide you through the process, we cover
1. The consumer petition bankruptcy forms.
You will need two forms, forms 6.27 and 6.28, which will have to be completed BEFORE you go to the County or High Court to petition for your bankruptcy and there are also guides on how to complete them.
How to get the forms 6.27 & 6.28
Due to budget and resource implications, the courts are no longer supplying bankruptcy forms and a decision was made by HMCTS to cease sending out bankruptcy forms around Feb/March 2011. We show you how to get the forms below. Should you not have access to a computer or a printer, the forms can be obtained from a local library, however a small fee may be charged. Alternatively, you may wish to contact the Insolvency Enquiry Line (IEL) and request for the forms to be sent out to you at your home address, along with a copy of the guidance notes. The Insolvency Enquiry Line telephone number is 0845 602 9848.
Download the forms to your computer
Have three copies of both forms one for the court, one for the Official Receiver and one you keep yourself.
Form 6.28, the Statement of Affairs (Debtor’s Petition), has many more pages but not all may apply to you. Just take your time and don’t forget to see the guidance notes with this form as they are very helpful. The actual form can be found here Form 6.28, the Statement of Affairs (Debtor’s Petition) and the guidance notes on how to complete the form is at Form 6.28, the Statement of Affairs (Guidance notes).
The key points of form 6.28
Most of the form is straightforward. You will need to insert any previous addresses you have lived at, details your occupation if working and the contact details of the creditors/lenders to whom you owe money and who feature in your bankruptcy.
If you don’t have all the details readily to hand then look through any statements and letters you have received from the creditors. There is no harm in telephoning them to get up-to-date balances and informing them that you will soon be petitioning your bankruptcy. Don’t get caught out in making extra payments to them before you go bankrupt.
Do you have CCJs, judgments or fines (perhaps without knowing)?
You check the registers for any CCJ, judgment and fine records recorded against YOU for as little as £4 by visiting Trust Online and make sure they're up to date.
DebtWizard’s IVA, bankruptcy & debt management expenditure guidelines
These guidelines will help you with what the minimum and maximum lenders/creditors allow for housekeeping (food and toiletries), hairdressing, clothes and work meals, should your income allow it, plus much more and can be found at IVA, bankruptcy & debt management expenditure guidelines.
Ensure you include everything in your expenditure. As a general rule, so long as they are reasonable, within the guidelines and can be justified the figures should be accepted by creditors/lenders and the Official Receiver's (ORs) office.
The Official Receiver's (OR) IPA/IPO Expenditure Guidelines
The following table provides further guidance as to what the OR may consider an appropriate amount in order to meet the reasonable domestic needs of a bankrupt and their family. The Income Payment Agreement (IPA) calculator has been updated to reflect these guidelines for nine different household scenarios.
These guidelines are not prescriptive; in each case assessment a decision should be made as to whether the expenditure is realistic, relevant and appropriate to the bankrupt’s circumstances and whether the amounts included are sufficient to provide for the reasonable domestic needs of the bankrupt and his/her family. Official Receiver Expenditure Guidelines
How to write your history
When completing the ‘Causes of Bankruptcy’ sections it is not acceptable to just write the words, ‘due to recession’. You will need to explain exactly what has happened. The following contains examples of some circumstances leading to a bankruptcy situation.
Don’t copy and paste them if they don’t apply to you!
‘About five years ago I was in a stable relationship but unfortunately this broke down and we separated. This then resulted in additional living costs for which I turned to credit to help meet the bills. I was able to make these repayments until I was made redundant/ changed job/ became ill though the stress/ etc:
'I approached a debt management company/entered into an IVA but could not afford the payments, or although my payments were on the low side I noted that the interest and late payment charges were growing out of control each month and my debts were increasing.'
'After taking professional advice I was informed that I have very little disposable income to pay my debts and feel I have no other option than to petition for my own bankruptcy. I have very little assets and believe that this is the only way I can get back control of my situation’.
Basically you need to explain what has been going on over the last few years and what you have tried to do about it.
Don't forget - Have three copies of both forms
One for the court, one for the Official Receiver and one you keep yourself.
2. Finding the bankruptcy fee / Do I have to pay Court fee of £175?
Finding the bankruptcy fee
The bankruptcy fee comprises two sections - the Official Receiver’s fee of £525 paid to The Insolvency Service and the Court fee of £175, total £700.
If you can demonstrate that you are on benefits then you may be exempt or pay a reduced court fee, see section below 'Do I have to pay Court fees of £175?'
Payment of the fees can be either in cash, postal order, a bank, building society, solicitor’s or charity cheque, and made payable to H M Paymaster General. Not surprisingly the Court does not accept personal cheques or credit card transactions!
DebtWizard has in the past corresponded with the Prime Minister over the high cost consumers have to pay to petition for their bankruptcy and as result the government is reviewing alternative ways of meeting the fee. You can read Mike’s letter to the PM here - Government to review the cost of consumer bankruptcy fees
We will report further on the outcome of the consultation but in the meantime there are numerous ways of finding the fee.
Do I have to pay Court fee of £175?
In certain circumstances, individuals may not have to pay a court fee. A system of fee waivers, known as the remission system, is available to those who would have difficulty paying a court fee and meet the appropriate criteria. An individual may be eligible for a full remission, where no fee is payable, or a part remission, where a contribution towards the fee is required. The current court fee for bankruptcy is £175.
The leaflet, Court fees – Do I have to pay them? (EX160A) explains what information the court needs to work out if you are eligible for a remission of the court fee.
It also contains the application form which must be completed in full and sent to the court with all the relevant supporting evidence.
3. Get the timing right & a new bank account
If you are in employment we always advise selecting a day halfway between pay-days. This gives enough time to sort out your problems with the OR and enables unfreezing of bank accounts before your next pay goes into it.
As a ‘financially challenged’ person, i.e. a bankrupt, you will only be allowed to have a basic bank account, not one with a cheque book or overdraft facilities. So don’t go bankrupt on pay-day as there may be a lot of money in the bank and it may be frozen for a while!
Important - If you are currently an undischarged bankrupt then you cannot apply to the Co-op Cashminder for a basic bank account. It is best to apply for such an account with the Co-op before you go bankrupt. The Co-operative Cashminder account was withrawn for undischarged bankrupts on the 17 September 2012, read more here - Co-operative Bank withdraws basic bank account
4. Finding the right court
Normally you will have to go the county court in the area where you have lived for the last six months and under some circumstances it may be the area where you have worked.
If you live in London then it will most likely be the High Court. If unsure then telephone your nearest County Court or the High Court and they will confirm which one you need to go to. Debtors' petitions below the value of £100,000 are dealt with as a County Court matter. If you are London based then for this purpose the Central London County Court will sit at the Thomas More Building, Royal Courts of Justice, where petitions will continue to be issued and heard.
Some courts will allow you to arrive on the day while others will set an appointment – make sure you know which stance your court takes.
5. What to wear & what happens at court?
Everyone dreads going to the court for fear of being in the ‘dock’, with lots of people milling around, listening and watching but this is simply not the case.
Dress in a way that is smart and respectful, but doesn't make you feel uncomfortable. If you are used to wearing suits, wear one, otherwise opt for smart trousers or a skirt and jacket. Avoid wearing jeans or tracksuits unless you have no other option.
Upon arrival you will go to the reception desk and be directed where to wait. They will take the paperwork from you; remember, have three copies, one for the court, one for the Official Receiver (OR) and one you keep yourself for reference purposes. Court staff will generally be supportive and treat you with respect. You will not be in the public eye and, after handing over the papers and paying the fee, you will wait in a quiet area for the circuit registrar/judge to look at your forms. You may be called in and if this happens then it could only be for a minute or two, just to confirm that you completed the form and no longer own something, or to simply clear up any ambiguity. The room you go in is often no bigger than your lounge at home.
It is not uncommon for you to not meet the registrar but instead be handed a sheet of paper with your bankruptcy order number on it. A date and time will then be agreed for you to take a telephone call from the Official Receiver's office to go through your forms and clear up any queries or ambiguities. And that's it – time to go home.
6. The Official Receiver’s (OR’s) interview
This phone call usually takes 30-45 minutes and within a few days of the bankruptcy order being made and is not as daunting as it sounds. If you are honest with all your answers and cooperate then there is not much to worry about. They will go through your income and reasonable expenditure to ascertain if you can afford to make any payments to towards the administration of the bankruptcy. If so then this will come under an Income Payments Agreement (IPA), which is explained in the next section.
7. Income Payment Agreements (IPAs)
This is a legally binding written agreement between the bankrupt and the Official Receiver or Trustee that requires the bankrupt, or a third party, to make specified payments to his or her Trustee for a specified period.
An IPA will detail the period for which it is to have effect and that the period can apply after the bankrupt has been discharged. The agreement will not extend more than three years after the date of the IPA. The IPA can be varied in writing. Basically you agree to make a payment to the OR for a period of three years based upon what the OR thinks you can afford.
8. When does bankruptcy end? / Proof of discharge / Post bankruptcy, your creditors
When does bankruptcy end?
Your bankruptcy and the restrictions generally end when you’re ‘discharged’. This is usually 12 months after the court made you bankrupt. It can be longer, for example, if you break the bankruptcy restrictions or don’t co-operate with your trustee.
Proof of discharge
Discharge is usually automatic - you won’t be sent a letter. To get proof, you can:
If you’re discharged early you’ll be sent a ‘Notice of early discharge’. This can happen if the Official Receiver (a bankruptcy court officer) finishes looking into your affairs and your creditors don’t object.
Post bankruptcy - your creditors
Once you are bankrupt you should not be paying any of the creditors/lenders that featured in your petition. It is not uncommon for a debt collector to say that they are outside the bankruptcy and that you still have to pay. If they are in your bankruptcy petition then they do not need to be paid as your financial affairs are being handled by the OR.
Just give them your bankruptcy order number and the name of the court and ask them not to call you again but instead to communicate with your Official Receiver (OR).
9. Will my name and address appear in the local paper?
No, this requirement stopped in 2009 and the only time it will appear is if you are uncooperative, been dishonest and the OR feels that there is some merit in publishing this to get more information from creditors or about your conduct.
10. Bankruptcy / debt jargon
Ever felt lost trying to understand all the terms used in the debt world? Our jargon buster should help you on your way!
See the DebtWizard Jargon Buster.