B in the A to Z of Advice

Date published: 17th September 2020

B letterankruptcy

What is Bankruptcy?

Bankruptcy also known as Sequestration in Scotland, is a formal method of dealing with debt if other options have failed or are inappropriate. For example, if you have no money left over to pay your debts, or it will take many years for you to re-pay your debts.

Who can apply for your bankruptcy?

  • A money adviser can apply for you if you have no disposable income or are on benefits, you have assets of less than £2,000 and you owe at least £1,500.  This route is called the Minimal Asset Process (MAP). If you owe more than £25,000* or have a disposable income this route is called Full Administration Bankruptcy.
  • Creditors can also apply to court for your bankruptcy if you owe one or more creditors a total of £10,000*.

To apply for bankruptcy you must have:

  • received money advice from a qualified money adviser
  • lived in Scotland, or have lived in Scotland or have established a place of business in Scotland, in the year immediately preceding the date of your application
  • not have been made bankrupt in the last five years
  • paid the application fee where applicable – the fee can range from nil to £150* currently
  • been provided with a copy of the Debt Advice & Information Package

You must also meet the following conditions:

  • Meet the conditions for the bankruptcy
  • Be apparently insolvent meaning you cannot pay your debts as they become due and/or you have received a charge for payment or statutory demand
  • Have a valid certificate for Sequestration

Why would you apply for bankruptcy?

Bankruptcy can take away the pressure from you of trying to pay creditors or negotiate with them. You are allowed to keep certain things, like household goods and a reasonable amount to live on.

When the bankruptcy is arranged, you can make a fresh start as debts previously due are written off with some exceptions e.g. student loans.

What are the consequences of bankruptcy?

You may have to pay a contribution towards your debt under a 'debtor contribution order' for up to 4 years. In many cases, you could be discharged from sequestration after only one year but this is not automatic.

If you have any assets like a house or other property you may lose them.

It may affect your ability in obtaining credit in the future.

Where to find an approved money adviser and for further information about bankruptcy?

Please visit either of the following:

Citizens Advice Scotland - Bankruptcy in Scotland

Accountant in Bankruptcy - Bankruptcy

If you want to discuss any debt issues CARF can help. Just give us a call on 0345 1400 094 and we can schedule you an appointment with one of our money advisers. 

* Please note these are temporary changes due to COVID19 and may be subject to further change.  You will be given advice based on the up to date regulations and information at the time.



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