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The increasing cost of declaring bankruptcy could discourage people with debt problems from seeking a solution to their financial problems.

From the start of this month the fee for petitioning for bankruptcy increased by £75 to £525. With an additional court fee also charged the total upfront fee for becoming bankrupt is now £700. Overall charges have gone up by 37% since March 2010.

The Insolvency Service claims that the increase has been necessary to cover the cost of administration. This £525 charge is a deposit to cover costs of managing the bankruptcy. A full administration fee of £1715, minus the deposit, is then recovered by the Insolvency Service at a later stage from the bankrupt's assets. In over half of bankruptcies however, this fee is never fully paid.

Debt relief orders offer an alternative 

Since being introduced in April 2009 debt relief orders have offered a cheaper alternative to bankruptcy.

An increasing number of people who are in financial trouble have been avoiding bankruptcy and taking this low cost option. In the first quarter of 2011 there were 6788 debt relief orders, a 20% rise on the previous year.

However not everyone qualifies for a debt relief order. To apply people need debts of less than £15000 and assets and savings worth less than £300.