Important advice on going bankrupt or declaring yourself bankrupt in Scotland
June 1, 2015
If you live in Scotland and are considering personal bankruptcy, there are certain issues that you need to be aware of. These include an understanding of what will happen to your assets, and also the long-term effect of bankruptcy on your credit file.
But first, you should know a little bit about how bankruptcy works in Scotland. To be eligible to file for bankruptcy, you need to meet the following criteria:
- owe unsecured debts of at least £1,500
- have proof of your ‘apparent insolvency’ – your creditor can confirm the debt to the court, or alternatively sign a form agreeing to your own file for bankruptcy
If you can’t prove apparent insolvency via your creditor, a third alternative exists called the Minimal Asset Process, or MAP (formerly known as Low Income Low Assets, or LILA bankruptcy).
Minimal Asset Process bankruptcy
If you have low income and few assets, you may be able to use this system to file for bankruptcy in Scotland. Again, specific criteria are required to be eligible, including:
- debts totalling between £1,500 and £17,000
- residence in Scotland, but not owning your home
- assets valued at less than £2,000 – individual assets should be valued at no more than £1,000 each, apart from a car which can be worth up to £3,000
How to apply for bankruptcy in Scotland – the bankruptcy petition
Professional advice from a recognised money advisor is required prior to completing your bankruptcy application form. Proof will be needed that you are in fact eligible to file for your own bankruptcy, and a fee of £200 should be included with your application.
Once the Accountant in Bankruptcy has received your petition, it generally takes around five working days for your bankruptcy to be confirmed, assuming they have all the information needed.
The consequences of bankruptcy
Once bankruptcy has been established, your Estate will pass into the hands of a Trustee. This may be the Accountant in Bankruptcy, or an independent Insolvency Practitioner. You may be wondering if you can keep your house in bankruptcy, or other assets such as a car.
Whether your house is sold depends on its inherent value, but the costs of selling are also taken into consideration. So although sale is a possibility, in some cases costs outweigh the benefits of sale.
If your car has a value of more than £3,000, it may be sold to realise money for your creditors. Should you need the vehicle for work, however, it would be probably be counter-productive to sell it as it is helping you to earn an income.
What about your credit file?
Entering sequestration will have an adverse and unavoidable effect on your credit file. It will remain on your file for six years following discharge from bankruptcy, after which time you can start to rebuild your credit rating.
At this time, you could apply for a ‘credit builder’ credit card, designed for people with poor credit ratings. Other specialist loan providers may also offer you credit once discharged, but the interest rates will be higher than a ‘standard’ loan until you can prove your ability to make all repayments in full and on time.
Scotland Debt Solutions offers professional and confidential advice on bankruptcy. We have a number of offices around the country, and aim to help Scottish residents become free of debt.
The start of a new year is the perfect time to take stock of your finances and put plans in place for a financially savvy year ahead. While you may feel your problems are insurmountable, there are always things you can do to help, most of them surprisingly easy. Here are 7 ways you can […]
If you have credit card debt which is attracting a high level of interest, moving this balance onto a lower interest card could save you a considerable amount of money. This process is known as a ‘balance transfer’, and if done correctly, this process could save you money and also reduce the time it takes […]
Many thousands of young Brits are being actively encouraged towards taking on debt and spending borrowed money even before they reach their 18th birthdays. That’s according to the price comparison website comparethemarket.com, whose research suggests that roughly one in four 16 and 17 year olds in the UK have been offered credit cards or asked […]
If you’re in serious debt with no hope of repaying your unsecured creditors, you don’t have to wait for a creditor to take legal action against you. You may be able to take matters into your own hands and apply for sequestration (bankruptcy in Scotland). This also prevents your situation from worsening. There are two […]
If you’re looking to save some money it’s a good idea to make a detailed budget that lets you see where your cash is currently being spent, and offers an overall view of your finances. You’ll need to collect together your income and expenditure details, including annual costs such as insurance, car expenses, birthdays and […]
Scotland has a number of formal debt solutions that can help you deal with a difficult financial situation. It’s advisable to take action as soon as possible, however, to prevent your levels of debt escalating when interest and other charges are added. Obtaining professional advice is key in this respect. An approved money advisor or […]