Insolvency Service shuts down bankruptcy business
Investigators from government body Insolvency Service shut down an assisted bankruptcy business
INVESTIGATORS from The Insolvency Service have shut down an assisted bankruptcy company after it found evidence of wrongful fee charging.
UK Bankruptcy (UKB), which received referrals from the IVA Council, assisted people who wanted to enter into a bankruptcy proceeding and charged them a fee.
In some cases the fees were added to credit cards and the debt then became part of the bankruptcy. This meant the credit card company was essentially funding the company’s business through paying its fees, and had no prospect of repayment. The Service also found evidence UKB sometimes took fees, about their usual charge, and gave the surplus funds to their clients as “cash back”.
The Service said the advice given by UKB was often very “basic” and could easily be obtained for free.
Between October 2007 and June 2008 the majority of UKB’s clients were referred by the IVA Council (IVAC). The Insolvency Service said IVAC purported to be a voluntary independent body that monitored the insolvency industry.
However, investigators labelled IVAC as a “marketing tool” for UKB. IVAC call centre operators would suggest that a person had been mis-sold an Individual Voluntary Arrangement, where a percentage of the debt is repaid over several years, when they may have been financially better placed to enter bankruptcy proceedings. They were then referred to UKB.
Stephen Speed, chief executive of the Insolvency Service, said: “At a time when finances are so tight for so many people it is regrettable that a business like UK Bankruptcy Limited should use dishonest practices to exploit the demand for debt advice for its own financial gain.
“I hope the action we have taken will serve as an important reminder to anyone in debt; good quality advice is freely available from charitable organisations.”
William Cleghorn, from Aver Chartered Accountants, was appointed provisional liquidator of UKB on 9 December 2008. He became interim liquidator of the company on 10 December this year.
UKB’s turnover for the year ended May 2008 was about £2.8m and it had more than 3,000 clients.
