Bankruptcy in Scotland
This page has been written for the benefit of readers considering voluntarily becoming bankrupt in Scotland. If a creditor is seeking to make you bankrupt we suggest that you immediately seek advice from a qualified debt adviser or a solicitor.
If you voluntarily become bankrupt a “Trustee” is appointed. Their job is to investigate your affairs to find out if you’re in a position to contribute towards your debts. Such contributions might be sought from your surplus income and/or any significant assets that you own (such as a home or car). Any money that they collect will be used to cover the costs of your bankruptcy and to repay your creditors.
Because you may be asked to contribute to your debts, your personal expenditure might be limited for a period of four years. Your significant assets might be sold if there is no other way to release the value held in them.
Basic Criteria for Bankruptcy
For one of the following routes to sequestration to be available you must:
Certificate for Sequestration
A Certificate for Sequestration provides documentary proof that you are “insolvent” and therefore qualify to become bankrupt. You’ll need to add this document to your bankruptcy application. It can be issued to you by a Money Adviser or by an Insolvency Practitioner.
You have 30 days to use the certificate once it has been issued.
Creditor Legal Action
If you have been subject to legal debt recovery action by a creditor this might suffice instead of adding a Certificate for Sequestration to your bankruptcy application. The adviser that you approach for advice will be able to confirm whether this is the case for you.
MAP (Minimal Assets Process) Sequestration
You will still need to approach an adviser in the first instance and they will be able to confirm whether or not you qualify.
The minimum total debt threshold for the Minimal Assets Process route to sequestration is lower (it is £1,500 rather than £3,000). However, you will not qualify for this route if your debt total is greater than £17,000.
The application fee for the MAP route to bankruptcy in Scotland is also lower. It is £90 rather than £200.
Bankruptcy will have a very serious effect upon your credit rating. The details of your sequestration will be kept on a public register. Some people may find that becoming bankrupt affects their employment status. If it is assessed that you can afford to contribute while bankrupt your expenditure will be limited, usually for a period of four years.
Despite these negative factors, bankruptcy may often be the most appropriate way to address your debts if you are in serious financial difficulty.