A charity providing help to migrants says it has gone into administration because of a cash-flow problem caused by changes to the legal aid system.
Refugee and Migrant Justice says it was left waiting up to two years for money.
It says more than 10,000 asylum seekers and trafficking victims, including nearly 900 children, could now be left without legal representation.
The Ministry of Justice said it had worked closely with the charity to help it cope with the new rules.
Set up in 1992 as the Refugee Legal Centre, Refugee and Migrant Justice (RMJ) is the UK's largest specialist provider of legal assistance to asylum seekers and other vulnerable migrants.
Earlier this month, the Archbishop of Canterbury, Dr Rowan Williams, wrote to Justice Secretary Ken Clarke and Home Secretary Theresa May to express his fears about its collapse.
"Lives will be put at risk and there are likely to be many more miscarriages of justice, which are already common in our asylum system," he said.
The legal charity employs more than 300 specialist staff representing some of the most complex immigration cases in the UK.
It began to struggle after reforms were made to the legal aid system in an effort to cut costs.
Under the new rules, bills are not finally settled until cases are completed.
RMJ said it was owed almost £2m and had been left waiting up to two years for payments on the most complicated cases.
It had sought bridging loans while it waited for the payments, but had no assets to offer as security to commercial lenders.
A spokesman for the Ministry of Justice said: "It is important asylum seekers have fair access to legal advice.
"We have worked closely with Refugee and Migrant Justice for the last few years for precisely this reason, and as a result they have received substantial support to help them transfer to the current payment system.
"However, it is also crucial that the government achieves value for public money. The fixed-fee system introduced three years ago is already being successfully used by the vast majority of not-for-profit organisations in this area of law.
"As other organisations have successfully made this transition, it is only reasonable to expect Refugee and Migrant Justice to do the same."