Bankruptcy Debt Trap - CAP’s campaign to help more people through DRO
It’s not every day that you get together with other organisations to campaign for change that could truly impact the lives of hundreds of people struggling in poverty across the UK. Just last month, I sat around a table in Parliament with key stakeholders in the industry to discuss proposed changes to the Insolvency Service.
It was exciting to hear that we were all united in our concerns for those on low incomes who struggle to afford bankruptcy fees, and to know that CAP’s recommendations will be a key consideration in the Government’s review process.
Like many people, you might be surprised to discover that it costs an individual £705* to go bankrupt, or double that if you are married and your debts are held jointly. You may think finding hundreds of pounds to escape debt is unjust, especially for clients who are on a low income. We think so, and that’s why we are campaigning for change.
We want to see more people able to access the Government’s lower cost alternative called a Debt Relief Order (DRO). This solution is available to people on a low income and with few assets, yet many of our clients narrowly miss out on qualifying for this because their debts are over the £15,000 threshold.
For these clients, the alternative is to save up for the bankruptcy fees, which would take years, so CAP helps by raising the money through our bursary fund and by applying for grants on their behalf. However, we estimate there are another 300,000 people in the UK who are in a similar position but without help. These people are simply too poor to go bankrupt.
CAP has been working together with the Insolvency body R3 and StepChange to input into the review of the DRO process. Our main recommendation is to raise the level of debt that can be processed through a DRO to £30,000. This simple change could mean that every day, approximately 465 individuals struggling with unmanageable debt and poverty will have access to a solution they have been previously excluded from.
Since the meeting, there has been real anticipation that change could be on the near horizon. Our next step is to respond the Insolvency Service’s call for evidence on 9 October. I am excited because I know CAP’s data represents some of the poorest and most vulnerable in society; it’s invaluable. It makes me proud to be a part of a charity that gives a voice to these people, and we are expecting real solutions to be made for them.
You can read our full report ‘Too poor to go bankrupt’ here.
*Fee for England & Wales (Northern Ireland = £645-670 and Scotland = £200).