Upcoming increase in custody fees to initiate creditor bankruptcy and forced liquidation proceedings

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From November 1, 2022, the filing fee for insolvency practitioners to be paid by applicants who initiate creditor bankruptcy or compulsory liquidation proceedings is to be increased. For bankruptcy filings by creditors the fee increases from £990 to £1,500 and for compulsory winding up proceedings from £1,600 to £2,600. These increases are the first since April 2016 and were reportedly implemented at least in part due to the relatively low number of recent bankruptcies.

The filing fee contributes to the administrator’s costs in administering a creditor’s bankruptcy or liquidation. However, if the assets realized during the bankruptcy or liquidation proceedings are sufficient to cover the bankruptcy trustee’s costs, the filing fee will be returned to the applicant.

Although the number of forced liquidations remains below pre-pandemic levels, a large number of open cases are reported to have insufficient assets to cover the administrator’s administrative costs. Therefore, according to the government’s website, the increase in the bail fee will “enable the insolvency service to continue to effectively administer and investigate insolvencies, maximizing outcomes for creditors while mitigating the risk of recovering costs to the taxpayer”.

The low number of recent compulsory liquidations has been partly driven by government pandemic measures to support business, including an increase in the debt threshold for a liquidation application to £10,000 from the previous threshold of £750. Despite speculation that the £10,000 limit would remain in place, it fell away on March 31, 2022.

Increased deposit fees may therefore create a new obstacle for creditors to collect low corporate or personal debt (for which the debt threshold is £5,000) as the cost of collection may actually exceed the debt owed.

www.gov.uk/…

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