Individual bankruptcy fee to double

Labour has failed to block a plan to double bankruptcy fees after MSPs heard the hike would save taxpayers £1.5 million. People will soon have to pay £200 to enter bankruptcy after the agency that administers the applications found that the present £100 fee was not covering its costs. The hike was "insensitive" in the current economic slump and could push debtors "over the edge", forcing them to turn to loan sharks, Labour said. Finance Secretary John Swinney said debtors can pay in instalments and that the fee will still be over a third cheaper than similar fees elsewhere in the UK. Some people going through the relatively new Lila (low income low assets) bankruptcy route, which allows people to clear their debts without waiting for creditors to take costly legal action, have tried to hide assets that could be used to pay creditors, Mr Swinney said. "The cost of delivering an application for bankruptcy through the Lila route has increased from £138 in 2008 to over £200, based on projected volumes for 2013," he told Holyrood's Justice Committee. Labour MSP Jenny Marra, committee vice-convener, said: "Loan sharks and payday lenders are being approached for the £100 so people can declare themselves bankrupt. An increase to £200 puts these people in a much more vulnerable position to these loan sharks." She said: "Your Government delivers many services that are not operated at full-cost recovery and I feel that in this time, when the economy is particularly vulnerable and a lot of people are struggling, it seems a very insensitive time to double the charge." Labour MSP Graeme Pearson said Citizens Advice Scotland has been lobbying for the fee to be removed completely. "Even the fact that you can pay by instalments, for some of these applicants it may well just push them over the edge," he said. Miss Marra and Mr Pearson moved to quash the fee hike but they were outvoted 6-2 by the committee's SNP and Liberal Democrat MSPs.