It would seem that more Britons will be caught in the trap of not being able to pay off their debts, but not having enough money to go bankrupt, as the Government is set to increase its bankruptcy fees by £90.

As of April 6, the Insolvency Service will raise its bankruptcy petition fees to £450, from £360. An extra court fee of £150 brings the total cost of declaring yourself bankrupt up to a significant £600.
 
Although the extra court fee can be waived if a debtor is on benefits, those struggling with debt repayments will most certainly find it difficult to scrape together even more money for a bankruptcy petition.
 
It is thought that more people will end up in informal debt management plans (DMPs). There are currently no recorded or published figures for these.
 
Some debt campaigners have called the fee hike a cynical ploy by the Government to lower record-breaking high insolvency figures.
 
Kevin Still, debt expert and director of debt solution provider Atlantic Financial Management, has said: “We have found a significant rise in the number of people requesting bankruptcy assistance where they have very limited disposable income and rising credit card debts. The choice between a Debt Management Plan and going bankrupt is a personal one, but requires professional debt advice before making such a major financial decision that may have a long-term impact.”
 
A spokeswoman has defended the decision, saying: “Over the last year, the average unsecured debt in debtor petition bankruptcies has been around £33,000. Even with the new higher petition deposit cost, it is not unreasonable to expect those getting the benefit of writing off this debt to pay a proportion of the cost.” 
 
The Government has also proposed changes to debt relief orders, which could mean that Britons with small pension funds will be able to use this form of debt management in future.
 
The Department for Business is consulting on these changes, in order for people who were previously ineligible for debt relief orders (DROs) to now take them out and wipe out modest debts within a year.
 
DROs were introduced in April 2009 and are an alternative to bankruptcy, debt management plans and individual voluntary arrangements. Designed for people with assets worth less than £300, this used to disqualify people with pension funds.
 
In order to use a DRO, people must have debts of under £15,000 and have less than £50 extra income each month after paying tax, national insurance and other household expenses. In the first nine months of DROs being introduced, almost 12,000 Britons have used them.  
 
Business Minister Ian Lucas told the BBC: “Following representations from independent money advisers, I’m proposing a common sense change to ensure that vulnerable people with a very small pension pot are treated fairly.”