Insolvency Deposit Fees Increase For Creditors

The Insolvency Service have recently announced that the Insolvency deposit payable when creditors issue a bankruptcy and winding up petition will increase from 1st November 2022.

The increase to the deposit fees are detailed below:

Current Fee Fee from 1 November 2022
Bankruptcy petition deposit £990 £1,500
Winding Up petition deposit £1,600 £2,600

It should be noted that the increases only apply to the deposit, so the Court fee payable (in addition to the deposit) will remain the same at £302. This means the total disbursements payable when issuing a bankruptcy petition will be £1,802 and for a winding up petition it will be £2,902.

The Insolvency Service have justified the deposit increase by stating that deposit fees have not changed since April 2016 and Insolvency case numbers have fallen to a historically low level. This latter reason is slightly misleading because there was a moratorium on almost all creditor winding up petitions during the pandemic due to the Corporate Insolvency and Governance Act 2020.

In order to issue a winding up petition, a creditor must demonstrate that the debtor is insolvent – i.e they are unable to pay their debts on demand. This can be done in a number of ways, but we would recommend sending a draft winding up petition. A draft winding up petition is the process of creating a copy of the petition but the creditor holds off on sending it immediately to the Court. Instead it is sent only to the debtor with an accompanying letter warning them that if they do not settle the debt within a set time period (usually seven days) then the petition will be submitted at Court.

The benefits of issuing a draft winding up petition are as follows:

1. Debtors are often motivated to avoid Court proceedings and the liquidation process, and Lovetts have found that 81% of draft winding up petitions result in full payment of the debt.

2. A draft winding up petition does not adversely affect the debtor’s credit rating so can be seen as a ‘softer’ initial option that incentivises the debtor to pay before their credit rating is affected.

3. Issuing a draft winding up petition avoids Creditors having to immediately pay significant disbursements detailed above.

If you issue a full winding up petition, your costs can be recovered from the debtor in the event they make payment prior to the hearing. The petitioning creditor is also entitled to a refund of the deposit that they paid.

If you have concerns or you are seeking to take robust action in the form of insolvency action, contact us today.

1 November 2022