The cost of going Bankrupt has risen considerably over the last couple of years. Today in England and Wales you will have to pay a fee of £705 per person in cash on the day you go to the Court with your application forms.

BMD Tip: The cost of bankruptcy in England & Wales increased by £5 to £705 in April 2014. If you are on a low income or are in receipt of certain benefits you may be eligible for a reduction. However you will still have to pay £525 per person.

Understandably this cost puts many people off using the solution even if they believe that it is the best one for them. This article therefore offers some tips and suggestions about how to get the money together so that you can pay the necessary Court fee.

Save for the Bankruptcy fee

The option many people take when trying to get together the cash required to go Bankrupt is to save it. However if you are already struggling to pay all of your debts, it is difficult to see how you could possibly have any spare cash to save the money required.

Given that a good way to save the money is to simply stop paying your unsecured creditors. You can then put aside the money you would have paid them and use it to pay your fee.

Clearly if you stop paying your unsecured creditors, they will not be very pleased. They are likely to contact you and threaten further action if you do not pay. If this happens you should tell them that unfortunately you are no longer in a position to pay what you owe and you will shortly be declaring yourself bankrupt.

BMD Tip: If you are a home owner there is a possibility of your creditors escalating their attempts to secure their debt against your property with a Charging Order if you tell them you plan to go Bankrupt. As such it might be best not to tell them of your intentions in these circumstances.

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Can you borrow to pay for Bankruptcy?

Instead of saving it is perfectly acceptable to borrow the money you need from a family member or friend.

If you do this you must remember that you will not be allowed to repay this debt while you are Bankrupt so you cannot include an allowance for doing this in your living expenses budget. However after you are discharged there is nothing to stop you paying what you borrowed back to them then.

As an alternative to borrowing from a friend or family member, you can also borrow the money you need from a credit card, bank overdraft or even a payday lender. This additional debt is then added to your Bankruptcy.

The court will not frown upon you for borrowing more in this way as the purpose of the extra borrowing is to ultimately stop your debt situation and the amount you owe to all of your creditors becoming any worse.

Sell your car to get the bankruptcy fee

At first the idea of selling your car to pay your Bankruptcy fees might seem crazy especially if you need it for work. However if your car is worth more than £1000 you might have to sell it and buy a cheaper one anyway if you are asked to do so by the Official Receiver.

If this is the case it is acceptable to sell the car yourself before you go through the process. You can then buy a cheaper vehicle and then use the remaining proceeds to pay your fee.

If you decide to sell your car or anything else to raise your fee you do need to be careful if the amount you raise from the sale is more than you need. Where this is the case you should hand over the extra cash to the official receiver once you are declared bankrupt unless you need it to cover your normal living expenses.

BMD Tip: You must not use this money to pay off any of the people you owe money to, even family members. Such a payment could be treated as a preferential payment and the official receiver may be able to ask for this money back.

Consider a Debt Relief Order

If your debt is less than £15,000 then an alternative to paying the Bankruptcy court fee is to use a Debt Relief Order (DRO).

This solution works in a very similar way to bankruptcy. However it is specially designed for people with smaller debts and lower incomes. If you meet the criteria required then the cost will be just £90 which will be far more affordable for you.

One of the problems of this solution however, is that you have to fit within very strict criteria to be eligible for it. One of these is that your disposable income most not be more than £50 a month. As such for many people the DRO is simply not a suitable alternative to paying the bankruptcy fees.