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Priced out of debt relief: How upfront insolvency fees keep people stuck in debt purgatory

31 March 2023

Priced out of debt relief: How upfront insolvency fees keep people stuck in debt purgatory [ 2.6 mb]

Debt relief orders and bankruptcy offer a fresh start to people who simply aren’t able to repay their debts. But upfront application fees are leaving people priced out of these options and with nowhere else to turn. Applying for a DRO costs £90, while declaring bankruptcy costs £680. This simply isn’t affordable for people who need these kinds of options. 

Recent Citizens Advice data shows 50% of the people we help with debt have a negative budget - meaning their income doesn’t even cover essential bills and spending. This rises to nearly 6 in 10 (59%) for people who fit the main qualifying criteria for a DRO. Saving up for fees can mean going without basics or falling further into debt. We found:

  • 9 in 10 people (89%) who had been in DRO or bankruptcy struggled to pay the fee 

  • 35% of people cut back on essentials like food

  • 1 in 4 fell behind on rent and bills

In other cases, fees mean enduring the negative effects of problem debt for very long periods of time. For the minority of debt clients with spare income, saving for a DRO takes nearly six months, while saving for bankruptcy could take 1 year and 10 months. 

With debt problems on the increase, we are calling on the government to remove upfront application fees for both DROs and bankruptcy, funding the Insolvency Service’s administration costs from alternative sources.