Are you receiving benefits such as Universal Credit, Tax Credits or ESA? If so, bankruptcy could be an ideal debt solution for you. If you have no other sources of income you will not have to make any further payments towards your debts.
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Is it possible to go Bankrupt if you are on Benefits?
If you are receiving benefits but are struggling with debt you can go Bankrupt. There is nothing to stop you using this solution if you feel it is right for you.
Bankruptcy may actually be a very sensible option for you. The fact that you receive benefits may mean that you are on a low income. As such other solutions such as an IVA which require you to make monthly payments may not be affordable.
If you go Bankrupt and cannot afford to make payments towards your debt you will not have to. The money you owe will be written off after 12 months.
Do you have to pay the Bankruptcy Application Fee if you receive Benefits?
If you want to go Bankrupt you will have to pay the application fee whether you are receiving benefits or not. Despite the fact that you probably have a low income you will not be eligible for any reduction.
In England & Wales the bankruptcy application process moved on line on the 6th April 2016. The fact that you no longer have to visit the Court is seen as a positive step by many.
However the downside is that there is no longer any option to waive part of the fee for those on a low income.
It is possible to pay the bankruptcy application fee in instalments. However you will not be able to submit your application until it is paid in full.
Will you have to make payments towards your Debts?
When you go bankrupt you have to declare all of your income including any benefits. The Official Receiver will then calculate if you can afford to pay towards your debts.
If your only income comes from benefits it is very unlikely you will have to pay anything. This is because you are unlikely to have any surplus income.
Your benefits are set so that you can pay for your reasonable living expenses only. There should be no surplus which can be used to pay for anything else.
You may have other forms of income as well as benefits. In these circumstances your total income is taken into account. If based on this total you can afford to make a payment towards your debts you will have to do so.
How to pay the Bankruptcy Fee if you are on Benefits
Finding the money to pay the Bankruptcy Fee is unlikely to be easy if you are on benefits. However there are some things you can consider which might help.
First can you borrow the money you need? Perhaps a friend or family member can lend you the money. If you have available credit on a card or overdraft you could also use this or borrow from a Payday lender. This is not ideal but you will not be penalised.
Where borrowing is not an option then you will have to save. To help you do this you should stop paying the debts which you will include in your Bankruptcy. Instead put this money aside and save it towards the fee.
When you stop paying your creditors will probably start to hassle you and threaten Court action. You should explain that you plan to go bankrupt in the near future and request that your account is put on hold.