Scottish edition

Freephone

0808 808 4000

www.nationaldebtline.org

Bankruptcy
Factsheetno.1

October2014

What is bankruptcy?
Bankruptcyisanoptiontoconsiderwhenyouhavereachedthestageofbeingunabletorepayyourdebtsoverarealistic
period.Bankruptcymaybeanoptionwhereyousimplycannotreachagreementwithyourcreditorsandyourfinancial
situationhasbecomeverydifficulttomanage.
Youarelikelytobeunderalotofpressure,withanumberofyourcreditorscompetingtocollecttheirdebtfromyou.
InScotland,thewordbankruptcyisusedlooselytodescribetwodifferentsituations.

Sequestration
Sequestrationisthewordusedtodescribethelegalprocessbywhichyouareformallydeclaredinsolvent(bankrupt).
Insolventmeansthatyoucannotpayyourdebtsastheybecomedue.Inthisfactsheetwewillusethewordsbankruptcy
andsequestration.

Informal bankruptcy
Thisisknownasatrustdeed.Atrustdeedinvolvesmakingan
offertoputyourdisposableincomeandyourassetstowards
payingasmuchofyourdebtsaspossible.Creditorswho
acceptthisofferagreenottoenforcepaymentoftheremainder
ofthedebtthattheyareowed.SeeAlternativesto
bankruptcylaterinthisfactsheetformoreinformationontrust
deeds.

See our fact sheet:

Trust deeds.

Thisfactsheetgivesinformationaboutmakingyourselfbankruptandwhenacreditorcanmakeyoubankrupt.
Beforeyouconsiderbankruptcy,youmaywanttolookatwhetheranyofthealternativestobankruptcymightbebetterfor
you.SeeAlternativestobankruptcylaterinthisfactsheet.

Choosing bankruptcy
Forsomepeopleindebt,bankruptcycanbesomethingthattheytryveryhardtoavoid.Forothers,itisthemost
sensiblesolutiontotheirdebtproblem.Ifyouareworriedaboutacreditormakingyoubankrupt,seeHowcana
creditormakemebankrupt?laterinthisfactsheet.

My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you work
out a budget and give you a personalised action plan setting out practical steps to deal with your debts.
www.mymoneysteps.org

Freephone0808 808 4000

www.nationaldebtline.org

Page 1 of 16

Bankruptcy
Scottish edition

Factsheetno.1

October2014

Beforeyoucandecidetogobankrupt,considerallthepossible
waysyoucoulddealwithyourdebtproblem.Thiswillinclude
takingintoaccount:
thetotalamountofyourdebts
thelikelihoodofbeingabletorepayyourdebtsand
yourabilitytodealwithyourdebts.
Also,takeintoaccount:
yourdisposableincome
thelikelylengthofarepaymentprogrammeand

Extra advice:
think carefully about
bankruptcy
Nosinglecriterionshouldcompletelyoutweigh
theother.Itmaybeamistaketochoose
bankruptcyjustbecauseofthesizeofyour
debts.Youshouldweighuptheadvantages
againstthedisadvantages.Talktoalocalmoney
advicecentre,lawcentre,citizensadvicebureau
orcontactusforadvice.

yourageandhealth.
Youshouldalsoconsideryourassetsandtheeffectsoflosingtheminbankruptcy.
Assetscouldinclude:
yourhouse
yourbusinessand
othervaluableitems.
Bankruptcyisoftenastraightforwardprocedureandtheadvantagesarelikelytobe:
relieffromthestressandanxietyofbeingindebt
havingyourdebtswrittenoff,ordischarged,after12monthsand
beingabletobuildanewlife.
Themaindisadvantagesofbankruptcyare:
thepossiblelossofcertainassets,particularlyyourhome
thatthetrusteehaswidepowersoveryourfinancialaffairs
thatcertaintypesofjobcanbeaffected(seeWillmyjobbeaffected?laterinthisfactsheetformoreinformation)
thatyoucannotholdpublicoffice(forexample,asanMP,MSP,councillor,ormemberofaschoolboard)andyou
cannotserveasacompanydirectorunlessthesheriffcourtagrees
youcannotapplyforcreditofmorethan500unlessyoutellthecreditoraboutyourstatusand
thebankruptcywillbelistedonyourcreditreferencefileforsixyears.Evenafterthisperioditcanstillbedifficultto
getcredit,suchasamortgage.Thisisbecauselendersmayaskwhetheryouhaveeverbeenbankrupt.

My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you work
out a budget and give you a personalised action plan setting out practical steps to deal with your debts.
www.mymoneysteps.org

Freephone0808 808 4000

www.nationaldebtline.org

Page 2 of 16

Bankruptcy
Scottish edition

Factsheetno.1

October2014

How do I go bankrupt?
Inordertopetitionforyourownbankruptcyyoumust:
havedebtsofover1,500
liveinScotland,orhavelivedinScotlandsometimeduringthelastyearand
nothavebeensequestratedinthelastfiveyears.
Inaddition,youmustalsobeabletoshowthatyou:
areeligibleunderthelowincomeandlowassetrules(seethelatersectionWhatarelowincomelowasset
bankruptcies?)or
areapparentlyinsolvent(seeWhatisapparentinsolvency?laterinthisfactsheet)or
havebeengivenaformalcertificateforsequestrationbyanapprovedperson,suchasamoneyadviser,tosaythat
youcannotpayyourdebts(seeWhatisacertificateforsequestration?laterinthisfactsheet).
Thesethreeroutesintobankruptcyareexplainedinmoredetailinthefollowingsections.

How much does it cost?

From1June2012,youhavetopayafeeof200tomake
yourselfbankrupt.Itispossibletopaythefeebyinstalments,
buttherearenoexemptionstopayingit.Contactusfor
adviceaboutpossiblesourcesoffinancialhelpifyoucannot
affordthefee.
Therearefulldetailsinthebankruptcyapplicationpackabout
howtopaythenonrefundablefee.Paymentcanbemadeby
cash,cheque,debitcardorpostalorderandyoucanpayby
post,inpersonoratabank.

Information:
help with the fee
Ifyouareeligibleforhelpfromasolicitorthrough
theAdviceandAssistanceScheme(for
example,youreceiveIncomeSupportoranother
incomerelatedbenefit),yoursolicitormaybe
abletopaythebankruptcypetitionfeeand
reclaimitfromtheScottishLegalAidBoard.

What are low income low asset bankruptcies?

Lowincomelowasset(LILA)bankruptciesareaspecialschemeforpeoplewantingtogobankruptwhomeetcertain
criteria.Youmusthaveagrossweeklyincomeofnomorethanthestandardnationalminimumwagefora40hour
workingweek,andlowassets(seeDoIhaveassets?laterinthisfactsheet).Thebigadvantageofthisrouteinto
bankruptcyisthatyoudonothavetoproveapparentinsolvency.

My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you work
out a budget and give you a personalised action plan setting out practical steps to deal with your debts.
www.mymoneysteps.org

Freephone0808 808 4000

www.nationaldebtline.org

Page 3 of 16

Bankruptcy
Scottish edition

Factsheetno.1

October2014

Youwillbeabletomakeanapplicationforyourownbankruptcy
undertheLILAschemeif:

Information:

youdonotownyourownhome

vehicles

youhavenoassetworthmorethan1,000

Acaruptothevalueof3,000thatyou
reasonablyneedwillnotbecountedasanasset
whenyouapplyforbankruptcyundertheLILA
scheme.

yourtotalassetsareworthlessthan10,000and
youhavealowincome.

Youwillbeclassedashavingalowincomeifyourearnings
(beforedeductionsfortaxandnationalinsurancecontributions)
arenomorethan260perweek.Ifyoureceive:

Information:
average income

IncomeSupport
incomebasedJobSeekersAllowance
incomerelatedEmploymentandSupportAllowance
WorkingTaxCredit

IfyouapplyforbankruptcyundertheLILA
scheme,thinkaboutyourincomeoverthe
previous12weeks.If,onaverage,thisworks
outtobemorethan260perweek,your
bankruptcyapplicationwillusuallyberefused.

HousingBenefit
helppayingyourcounciltaxbillfromthecouncil
PensionCreditor
UniversalCredit
youarelikelytomeetthelowincometest,evenifyouractualincomeismorethan260perweek.Contactusfor
advice.

What is apparent insolvency?

Apparentinsolvencyisalegaltermmeaningthatyoucannotpayyourdebtsastheybecomedue.Youwillonlybe
apparentlyinsolventincertaincircumstances.Themostcommoncircumstancesareasfollows.
Youhavereceivedachargeforpaymentandthe14day
timelimitforpaymenthaspassedwithoutyoupayingthe
debt.Achargeforpaymentisaformalrequestinwritingthat
youpaytheamountowed.Itwillhavethewordschargefor
paymentprintedacrossthetop.
Acreditorhasservedanoticeonyoucalledastatutory
demand,requiringyoutopayoffadebtwithin21daysof
thedateofthedemandandyouhavenotpaidthedebt.

Warning:
statutory demands
Ifyouhavebeensentastatutorydemandand
youdonotwanttobemadebankrupt,youwill
needimmediateadvice.SeeHowcana
creditormakemebankrupt?laterinthisfact
sheetformoreinformation.

My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you work
out a budget and give you a personalised action plan setting out practical steps to deal with your debts.
www.mymoneysteps.org

Freephone0808 808 4000

www.nationaldebtline.org

Page 4 of 16

Bankruptcy
Scottish edition

Factsheetno.1

October2014

What is a certificate for sequestration?

Acertificateforsequestrationisaformaldocumentconfirmingthatyoucannotpayyourdebtsastheyfalldue.
Acertificateforsequestrationcanonlybeissuedbyan
authorisedperson,whocouldbe:
aninsolvencypractitioner
amoneyadviserworkingatacitizensadvicebureauorlocal
councilor
amoneyadviserworkingforanyaccreditedadviceagency.

Extra advice:
finding an 'authorised
person'
Tofindyournearest'authorisedperson',talktoa
localmoneyadvicecentre,lawcentre,citizens
advicebureauorcontactusforadvice.

Beforegrantingyouacertificateforsequestration,the
authorisedpersonmust:
provideyouwithacopyoftheScottishGovernmentsDebtAdviceandInformationPackage
adviseyouaboutalternativeoptionstobankruptcyand
explaintheeffectsofbankruptcytoyou.
Thiscertificatelastsfor30daysfromthedateitissignedbytheauthorisedperson.Thereforeyoumustcompleteyour
bankruptcyapplicationwithinthistime.

Filling in your own petition

TheapplicationpackthatyouneedtocompletecanbedownloadedfromtheAccountantinBankruptcys
website.Alternatively,youcancontacttheAccountantinBankruptcyorNationalDebtlineandasktobeasentacopy
throughthepost.SeeUsefulcontactsattheendofthisfactsheet.
Thereisadifferentapplicationpackthatshouldbeusedwhereitisnotanindividualthatisapplyingforbankruptcy.For
example,ifbankruptcyisbeingappliedforonbehalfofatrustorpartnership.ContactBusinessDebtlineformoreadvice
aboutbankruptcyifyouhaveasmallbusiness.SeeUsefulcontactsattheendofthisfactsheet.

My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you work
out a budget and give you a personalised action plan setting out practical steps to deal with your debts.
www.mymoneysteps.org

Freephone0808 808 4000

www.nationaldebtline.org

Page 5 of 16

Bankruptcy
Scottish edition

Factsheetno.1

October2014

Extra advice:

legal help
Youmayqualifyforfree,lowcostlegaladvice
undertheAdviceandAssistanceSchemefroma
solicitor.Talktoalocalmoneyadvicecentre,law
centre,citizensadvicebureauorcontactusfor
advice.

How will I become bankrupt?

Warning:
complete the forms
accurately
Ifyoutrytocompletetheseformsyourself,be
careful.Youcouldbeprosecutedifyousupply
falseinformation.Youmustdiscloseyour
financialdetailsaccurately,includingallyour
income,assetsanddebts.Ifindoubt,seekhelp.
Also,therewillbedelaysinprocessingyour
applicationiftheAccountantinBankruptcyhasto
writetoyoutoaskformoreinformationor
evidence.

Bankruptcywillnormallybeawardedwithinfiveworkingdays
oftheAccountantinBankruptcyreceivingacorrectlycompletedapplicationwithallthenecessarysupportinginformation.
Onceyouhavebeendeclaredbankrupt,itmeansthatyouhavetohandoveryourassetstothepersonwhoisgoingto
administeryourbankruptcy.Theyarecalledthetrustee.ThetrusteewillbeeithertheAccountantinBankruptcyoran
insolvencypractitioner.Ifyounominatedaninsolvencypractitionerinyourbankruptcypetitiontoactasyourtrustee,itis
likelythattheAccountantinBankruptcywillmakethemyourtrustee,aslongastheyagreetothis.Ifyouareapplyingfor
bankruptcyunderthelowincomelowassetrules,yourtrusteewillmostlikelybetheAccountantinBankruptcy.
Onceyourtrusteeisappointed,theytakeoveryourfinancial
affairsandcontrolthemuntilyouaredischarged,oruntilall
yourassetsaredisposedof.

Information:
discharge

Yourtrusteewillarrangeameetingwithyou.Atthemeeting,
theywill:
checkthedetailsonyourapplicationform

Dischargemeansthatyouarenolongerliablefor
yourdebtsaftertheinitialperiodofyour
bankruptcyends.SeeHowlongwillmy
bankruptcylast?laterinthisfactsheet.

tellyouwhattheirrolewillbe
discusswhatyouobligationsareand
answeranyquestionsyoumayhave.

How can a creditor make me bankrupt?

Bankruptcyisusuallyalastresortandmostcreditorsareunlikelytomakeyoubankrupt.Youmustowe3,000ormore
beforeacreditorcanmakeyoubankrupt(althoughtwoormorecreditorscanclubtogetherandapplytomakeyou
bankrupt).Itcostscreditorsmoneyincourtfeesandtheyareunlikelytogetthedebtpaidbacktothemunlessyouhave
assetsthatcanbesoldtopaythedebts.Assetsarethingsthatyouownsuchasyourhome,carorsavingsyouhavein
thebank.SeeDoIhaveassets?laterinthisfactsheet.

My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you work
out a budget and give you a personalised action plan setting out practical steps to deal with your debts.
www.mymoneysteps.org

Freephone0808 808 4000

www.nationaldebtline.org

Page 6 of 16

Bankruptcy
Scottish edition

Factsheetno.1

October2014

Theotherwaythatcreditorscangettheirdebtspaidthroughmakingyoubankruptisifyourincomeisaboveaverage.In
thissituation,youmighthavetomakepaymentsforthreeyearstopayoffsomeofyourdebts.SeeWillIhavetopay
anythingfrommywages?laterinthisfactsheet.
AcreditorwantingtomakeyoubankruptmusthavesentyouacopyoftheScottishGovernmentsDebtAdviceand
InformationPackage.Theymustalsoprovethatyouhavebecomeapparentlyinsolventwithinthelastfourmonths.
SeethesectionWhatisapparentinsolvency?.
Togettothisstage,acreditorwillbelikelytohaveserved:
achargeforpaymentor
astatutorydemand
onyouandthetimelimitforyoutoreplywillhaverunout.Thetimelimittoreplyis14daysforachargeforpaymentand
21daysforastatutorydemand.

Can anyone else make me bankrupt?

Atrusteeappointedunderatrustdeedcanpetitionforyourbankruptcyifyouhavefailedtofollowtheirinstructionsand
notcooperated,oriftheythinkitisinthebestinterestsofthecreditors.Formoreinformationontrustdeeds,see
Alternativestobankruptcylaterinthisfactsheet.

Do I have assets?
Onceyouarebankrupt,yourassetstransfertothetrustee.
Thetrusteemaywishtosellanyassetsyouhave.Assetsare
thethingsthatyouown,suchas:money,savings,yourhomeor
anyproperty,vehicles,lifepolicies,jewelleryandshares.Also,
ifyouareowedanymoney,thisisalsoregardedasanasset.

Extra advice:
vehicles
Yourcarmaybeatriskofsaleunlessyoucan
showthatyouneedittotraveltoorfromwork,or
todoyourjob.

Certaingoodsarenottreatedasassetsinbankruptcyandthe
lowincomelowassetsscheme.Theseareitemssuchas:
clothing,bedding,furnitureandhouseholdequipmentforbasic
domesticneeds.Itemsyouneedtoearnaliving(forexample,
toolsandbooks)canbeexcludeduptoatotalvalueof1,000.Avehiclethatyouneedtotraveltoandfromwork,orto
doyourjob,canalsobeexcludeduptothevalueof3,000.
Ifyouhavevaluableandnonessentialhouseholditems,theymaybesoldbythetrusteetoraisemoneytopaytoyour
creditors.
Ifyouhavetoolsorbooksandthesearevaluedatatotalofmorethan1,000,theymaybesoldbythetrusteeevenif
theyareneededbyyoutocarryoutyouremployment.Inthesecircumstancesyouwouldnormallybeallowedtobuy
cheaperreplacements.
Ifyouhaveavehicleanditisvaluedatmorethan3,000,itmaybesoldbythetrusteeevenifitisneededbyyouto
gettowork,ortodoyourjob.Inthesecircumstances,youwouldnormallybeallowedtobuyacheaperreplacement.

My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you work
out a budget and give you a personalised action plan setting out practical steps to deal with your debts.
www.mymoneysteps.org

Freephone0808 808 4000

www.nationaldebtline.org

Page 7 of 16

Bankruptcy
Scottish edition

Factsheetno.1

October2014

Pensions
Ifyouhaveafutureentitlementtoapension,thiswillnotusuallybeaffectedbybankruptcy.Thisappliestoalmostall
approvedpersonalandoccupationalpensions.
Ifyouareconcernedaboutyourfuturepension,youmightwanttotakeindependentadvice,orspeaktotheAccountant
inBankruptcyshelpline.SeeUsefulcontactsattheendofthisfactsheetforthephonenumber.
Ifyouarealreadyreceivingyourpensionwhenyoubecomebankrupt,orifyourpensionbecomespayablebeforeyouare
discharged,itwillnotbetransferredtothetrustee.However,thetrusteewillbeabletotakeyourpensionintoaccount
whendecidingifyourincomeishighenoughforyoutomakeacontributiontoyourcreditors.

Will I have to pay anything from my wages?

Thiswillonlyhappenifyourincomeisaboveaverageandit
appearsthatyoumighthaveavailableincomeafterpaying
ordinaryhouseholdexpenses.

Warning:
keep to the payments

Yourtrusteewilllookatyourincomeandcompareitwithhow
muchyouandyourfamilyneedtoliveontomaintaina
reasonablestandardofliving.Ifyourtrusteethinksthatthereis
asurplus,theywillexpectyoutomakeacontributiontowards
thecostofyourbankruptcyandtowardspayingyourdebts.
Thisiscalledanincomepaymentsagreement.Youwillhave
theoptionofhavingdeductionstakenfromyourwages.
Ifyoucannotreachanagreementwithyourtrustee,thesheriff
willbeaskedtodecidetheamountyoushouldpay.Thisis
calledanincomepaymentsorder.Yourtrusteemayaskthe
sherifftoorderthatpaymentsaretakendirectlyfromyourwages.
Everysixmonthsyouwillbesentaquestionnairesothatyour
financialsituationandthelevelofcontributionsyouaremaking
canbereviewed.Evenifyourcircumstanceshavenot
changed,itisimportantthatyoureturnthequestionnaire.
Incomepaymentsarrangementsandincomepaymentsorders
lastforthreeyearsfromthedatetheyaresetup.

Will my job be affected?

Ifyouhaveanincomepaymentsarrangement
(IPA)oranincomepaymentsorder(IPO),itis
importantthatyoukeeptothepayments.Ifyou
stopmakingpaymentsonanIPA,yourtrustee
couldapplytothesheriffforanIPO.Itisa
criminaloffencetostopmakingthepayments
underanIPOandthetrusteecouldreportyouto
thesheriff.

Information:
benefit income
Ifyourmainsourceofincomeisstatebenefits,
yourtrusteewillnotusuallytakeacontribution
towardsthecostofyourbankruptcyandyour
debts.

Youremploymentwillnotbeaffectedbybankruptcyunless:
youhaveacontractofemploymentwhichcontainsaclauseaboutbankruptcy(forexample,whenyouhavea
responsibilityforhandlingmoneyorareinapositionoftrust)
youholdapublicoffice(forexample,youareanMP,MSP,councillorormemberofaschoolboard)

My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you work
out a budget and give you a personalised action plan setting out practical steps to deal with your debts.
www.mymoneysteps.org

Freephone0808 808 4000

www.nationaldebtline.org

Page 8 of 16

Bankruptcy
Scottish edition

Factsheetno.1

October2014

youareacompanydirectoror
yourtradeorprofessionhasarulewhichpreventsyoufrompractisingwhilstbankrupt(forexample,solicitorsand
accountants).
Ifyouareconcernedaboutwhetheryouremploymentwillbeatriskifyougobankrupt,contactusforadvice.

Property and your home

Onceyouhavegonebankrupt,anypropertywhichyouown,
includingyourhome,transferstothetrustee.Thisgivesthem
aninterestinthepropertywhichmayallowthemtosellit.

Remember:
secured debts

Ifyouownyourownhome,itmaybesold,dependingon
whetherithasanyvalueorequityinit.

Ifyouhavealoansecuredonyourhome,you
needtokeepupwiththerepaymentstoprevent
repossession.

Ifyourspouselivesinthefamilyhome,heorshemustagreeto
allowthesale.Ifoneofyourchildrenlivesinthefamilyhome,
youmustagreetoallowthesale.Ifagreementisnotgiven,the
trusteehastoapplytothesheriffcourtforanorderallowingsale.Thecourtcaneither:
granttheorder(possiblywithconditions)
refusetogranttheorderor

postponegrantinganorderforuptothreeyearstoallowyouandyourfamilytofindsomewhereelsetolive.
Inthecaseofjointlyownedproperty,thetrusteeisonlyentitledtothebankruptsshareoftheequityintheproperty.It
maybepossibleforanyjointowner,orfamilyandfriends,tomakeanoffertobuyoutyourshareoftheequity.
Ifthereisnoequity,thetrusteehasnoreasontosellthe
property.Ifyouaredischargedfromyourbankruptcyandthe
houseremainsunsold,itisstillanassetand,ifhouseprices
rise,itmaybesoldinthefuture.Yourtrusteestillhastheduty
tosellanyassetsthataretransferredtothem.Ifyourtrustee
decidesthattheyarenotgoingtosellyourhome,theywill
formallyabandonitanditwillbetransferredbacktoyou.They
mustmakeadecisionaboutyourhomewithinthreeyearsof
youbecomingbankrupt.

Information:
homelessness
Ifatrusteesellsyourhome,localauthoritieswill
notautomaticallytreatyouasintentionally
homeless.Contactusforadvice.

What if I rent my home?

Ifyouareatenant,thetrusteewillnormallyhavenointerestinthehouseaslongasyoucanprovethatitisrented.
However,otherproblemscanarisefortenantswhoarebankruptandinsomecasesthesecanaffectwhetherornotyou
willloseyourhome.Inthissectionweexplaintheseproblems.

My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you work
out a budget and give you a personalised action plan setting out practical steps to deal with your debts.
www.mymoneysteps.org

Freephone0808 808 4000

www.nationaldebtline.org

Page 9 of 16

Bankruptcy
Scottish edition

Factsheetno.1

October2014

Can being bankrupt cancel my tenancy?

Someprivatesectortenancyagreementscontainanirritancyclausewhichallowsthelandlordtoterminateyourtenancy
onthegroundsofbankruptcy.Ifyourtenancyhasanirritancyclause,contactusforadvice.

What if I have rent arrears?

Ifyouhaverentarrears,insomesituationsyourlandlordcouldstartrepossessionactionevenafteryougobankrupt.
Speaktoyourlandlordtocheckhowtheywouldtreatyourarrearsifyougobankruptandcontactusforadvice.

Do I have to pay my rent if I am bankrupt?

Onceyouaremadebankrupt,youarestillresponsibleforkeepingupyourrentpayments.Whenyourtrusteeis
assessingwhatincomeyouhaveavailabletopaycreditors,theywilltakeintoaccountyourrentpayments.However,if
yourtrusteethinksyouarepayingtoomuchrent,youmayhavetomove.Thisisbecausethetrusteecanapplytothe
sheriffcourttosetalimitonhowmuchrentyoupay.Ifyoudonotpayyourrentregularly,yourlandlordcouldstart
repossessionaction.

Other effects of bankruptcy

Utilities
Yourelectricityandgassuppliersmayinsistthatyouhaveprepaymentmetersinstalled.
Ifyouhadafuelprepaymentmeterbeforeyouweremadebankruptandthishadbeensettocollectarrears,itshould
beadjustedtotakeaccountofcurrentusageonlyafteryouaremadebankrupt.
Yourtelephonecompanymayallowthesupplytoremaininyournamebutmayinsistonadeposit.Itmaybe
necessarytostopandthenrestartthetelephonesupply.Itmaybepossibleforanotherperson,forexamplea
spouse,relativeorthirdparty,totakeresponsibilityforpaymentofthetelephonebill.
Alloutstandingelectricity,gasandtelephonebillsatthedateofbankruptcyaretreatedasordinarydebtsandincludedin
yourbankruptcy.

Council tax
Youwillstillbeliableforyourpresentandfuturecounciltax.Butanycounciltaxarrearsdueatthedateyoubecame
bankruptareincludedinthebankruptcy.Thecouncilwillnotbeabletoenforcethisdebtonceyouarebankrupt.
If,beforeyouwerebankrupt,youlosttherighttopayyourcounciltaxbyinstalmentsbecauseyoudidnotmakethe
paymentsontime,youwillhavebecomeliabletopaythewholeyearscounciltax.Thisdebtwillbeincludedinthe
bankruptcyandyouwillnotbeliableforanypaymentstowardscounciltaxfortherestofthefinancialyear,aslongasyou
remainbankrupt.

My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you work
out a budget and give you a personalised action plan setting out practical steps to deal with your debts.
www.mymoneysteps.org

Freephone0808 808 4000

www.nationaldebtline.org

Page 10 of 16

Bankruptcy
Scottish edition

Factsheetno.1

October2014

Bank accounts
Youmayhavetocloseyourbankorbuildingsocietyaccount
whenyouaremadebankrupt.Yourtrusteemayallowyouto
openanotheraccount,usuallyaninstantaccesstype,where
thereisnochequebook,chequecardoroverdraftfacility.

What will happen to my credit rating?

See our information

sheet:
Basic bank accounts.

Creditreferenceagenciesholdinformationaboutbankruptcyfor
sixyearsfromthedateyourbankruptcywasgranted.Thiscan
significantlyaffectyourabilitytogetfurthercredit.
DetailsofyourbankruptcywillalsoappearintheRegisterofInsolvencies,whichisapublicregister.Yourdetailswill
remainonthisregisteruntiloneyearafteryourtrusteehascompletedtheirduties.

How long will my bankruptcy last?

Yourbankruptcywillnormallylastforoneyear.Afterthistime
youwillnolongerbeliableforthedebtsincludedinthe
bankruptcy.Thisiscalleddischarge.Somedebtswillnotbe
writtenoffattheendofyourbankruptcy.Seethenextsection
Willanydebtsbeexcludedfrommybankruptcy?formore
information.
Afterdischarge,ifyougainnewassets,thetrusteewillhaveno
claimonthem.However,yourtrusteecontinuestohaveaduty
tosellanyassetsthatweretransferredtothembecauseofyour
bankruptcy.

Will any debts be excluded from

my bankruptcy?

Information:
letters from creditors
UndertherulesintheConsumerCreditAct
1974,yourcreditorswillusuallyhavetokeep
sendingyouannualstatements,aswellas
arrearsanddefaultnoticesinasetformat.This
willhappenevenwhenyouarebankrupt.Dont
worry,thisdoesnotmeanthatthereisaproblem
withyourbankruptcy.Ifyoureceiveotherletters
fromyourcreditorsdemandingpayment,contact
usforadvice.

Althoughyourliabilityformostdebtswillbewrittenoffonceyouaredischarged,thereareexceptionstothis.Evenafter
dischargeyouwillstillbepersonallyliablefor:
fines,penalties,compensationandforfeitureordersimposedbyanycourt
anydebtthathasbeenincurredthroughfraud
studentloans
anyobligationtopaymaintenancetoanexspousedueunderacourtorder(notchildsupport
agencyorchildmaintenancearrears)and
moneyowedtoacreditorwhosedebtissecuredonyourproperty(suchasamortgageorsecuredloan).

My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you work
out a budget and give you a personalised action plan setting out practical steps to deal with your debts.
www.mymoneysteps.org

Freephone0808 808 4000

www.nationaldebtline.org

Page 11 of 16

Bankruptcy
Scottish edition

Factsheetno.1

October2014

Information:

Remember:

benefit overpayment

ongoing payments

Benefitoverpaymentswillbeincludedinyour
bankruptcyaslongastheenddateofthe
overpaymentwasbeforethedateofbankruptcy.

Althoughyoumayhaveincludedinyour
bankruptcyanycounciltax,childsupportorchild
maintenancearrearsdueatthedateyouwere
madebankrupt,youarestillliabletopay:
ongoingchildsupportandchildmaintenance
paymentsand

Remember:
payments from income

ongoingcounciltaxpayments.

Evenifyouhavebeendischargedfromyour
debts,youmaystillhavetomakeacontribution
towardsthemthroughanincomepayments
arrangementoranincomepaymentsorder.See
theearliersectionWillIhavetopayanything
frommywages?.

Bankruptcy offences
Beingbankruptputscertainobligationsandresponsibilitiesonyou.Youwillbeexpectedtocooperatewiththetrusteeat
alltimesandkeeptheminformedaboutanychangesinyourcircumstances.Thisincludestellingthemthatyouhave
movedhouse,orthatyourfinancialcircumstanceshavechanged.Ifyoufailtodothis,youmaybeguiltyofacriminal
offence.
Alsoyoumustnot:
takeoutcreditformorethan500withouttellingthelenderorsupplierthatyouarebankrupt
startupalimitedcompany,orbeinvolvedinthedaytodaymanagementofalimitedcompany,withoutpermissionof
thesheriffcourtor
actasanMP,MSPorasamemberofalocalcouncil,aJusticeofthePeace,oramemberofaschoolboard.
Thisisnotacompletelistofyourresponsibilities.Yourtrusteewillgiveyouafulllistofwhatisexpectedofyou.
Ifyourtrusteeconsidersthatyoumaybeguiltyofabankruptcyoffence,theymayreportyoutotheProcuratorFiscal.
Theycanalsoimposerestrictionsonyou.SeethenextsectionBankruptcyrestrictions.

My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you work
out a budget and give you a personalised action plan setting out practical steps to deal with your debts.
www.mymoneysteps.org

Freephone0808 808 4000

www.nationaldebtline.org

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Bankruptcy restrictions
Youwillusuallybedischargedfrombankruptcyafteroneyear
but,ifyourtrusteeconsidersthatyourbehaviourhasbeen
dishonestorblameworthyinsomeway,theymayreportyouto
theAccountantinBankruptcy.TheAccountantinBankruptcy
mayapplytothesheriffforabankruptcyrestrictionsordertobe
madeagainstyou.Ifyouhavealsocommittedacriminal
offence(seeBankruptcyoffencesearlierinthisfactsheet),
yourtrusteemayalsoreportyoutotheProcuratorFiscal.

Warning:
during your bankruptcy
Bankruptcyrestrictionsorderscanarisedueto
yourbehavioureitherbeforeorduringyour
bankruptcy.

Ifthesheriffmakesabankruptcyrestrictionsorder,youwillhave
somerestrictionsplacedonyouandthesewillcontinueafteryouaredischarged.Restrictionscanapplyforbetween2
and15years.
Examplesofbehaviourthatcouldleadtoabankruptcyrestrictionsorderbeingmadeinclude:
notcooperatingwithyourtrusteewhilstyouarebankrupt
incurringdebtswhenyouknewthatyouhadnoreasonablechanceofrepayingthem
givingawayassetsorsellingthematlessthantheirvalue
deliberatelypayingoffsomecreditorsinpreferencetoothers
gamblingormakingrashspeculations,orbeingunreasonablyextravagant
failingtokeepproperrecords
fraud
causingyourdebtstoincreasebyneglectingyourbusinessaffairs
failingtosupplygoodsorservicesthatyouhavebeenpaidforor
carryingonabusinesswhenyououghttohaveknownthatyoucouldnotpayyourdebts.
Abankruptcyrestrictionordermeansyouarenotallowedto:
startupalimitedcompanyorbeinvolvedinthedaytoday
managementofalimitedcompany,withoutpermissionfrom
thecourt
actasanMP,MSPorasamemberofalocalcouncil,a
JusticeofthePeaceoraschoolgovernorinEnglandor
Wales
actasaninsolvencypractitioner
applyforcreditofmorethan500withouttellingthelender
thatyouaresubjecttoabankruptcyrestrictionor

Information:
bankruptcy restrictions
undertakings
Ifyouacceptthatyourbehaviourwasdishonest
orblameworthy,youmayagreetoentera
bankruptcyrestrictionsundertaking.Thishasthe
sameeffectasabankruptcyrestrictionsorder,
butwillnotinvolvegoingtocourt.

failtoinformanyonethatyouwishtodobusinesswiththe
name,ortradingname,underwhichyoubecamebankrupt.

My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you work
out a budget and give you a personalised action plan setting out practical steps to deal with your debts.
www.mymoneysteps.org

Freephone0808 808 4000

www.nationaldebtline.org

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October2014

Alternatives to bankruptcy
Trust deed
Ifyouhavedebtswhichtotalatleast5,000,youmaybeabletoapplyforatrustdeed.Thisisalegalagreementinwhich
youtransferyourpropertytoatrusteeforthebenefitofyourcreditors.Thetrusteemanagesyourpropertyinlinewith
thetrustdeed.
Thisislessformalthanbankruptcy.Itencouragescreditorstoacceptlessthan100penceinthepoundinpaymentand
mayallowyoutokeepyourhome.
Themaindisadvantageisthatcreditorswhodonotacceptitarenotboundbyit.Theycanstilltakefurtheraction
againstyou.Aprotectedtrustdeedisusuallymoreuseful.

Protected trust deed

Thetrustdeedwillbecomeprotectedifenoughofyourcreditorsagreetothis.Youwillneedagreementfromatleasthalf
ofyourcreditors,whoareowedatleasttwothirdsofyourtotaldebt.Creditorswhohavenotobjectedinwritingwithin
fiveweeksofthedateofthenoticeofyourtrustdeedwillbetreatedasiftheyhaveagreed.

Information:
finding an insolvency
practitioner
NationalDebtlinecansendyouaninformation
sheetcalledHowtofindaninsolvency
practitioner.Contactusforacopy.
Alternatively,alistofinsolvencypractitionerscan
beobtainedfromtheInstituteofChartered
AccountantsofScotland.SeeUsefulcontacts
attheendofthisfactsheet.

Therewillbefeesthatyouwillhavetopaytothetrusteefor
settingupandrunningthetrustdeed.Thesefeescanbevery
expensiveandwillbepaidoutofyourcontributions.Youwill
normallybeexpectedtocontributearegularmonthlyorweekly
payment.Thiswillbeforatleastfouryears.Yourcreditors
cannotnormallytakeanyfurtheractionagainstyou.
Ifyoufeelthatatrustdeedisappropriateforyou,contactus
foradvice.NationalDebtlinemaybeabletoreferyoutoan
insolvencypractitioner.

See our fact sheet:

Trust deeds.

Informal arrangement in short settlement

ThesearealsocalledExtrajudicialcompositioncontracts.Theyareinformalarrangementsinwhichyourcreditors
agreetoacceptlessthanthefullamountofthedebtinreturnforyouragreeingtogivethemapartofyourincomeovera
fixedperiod.
Theyarerelativelyrare.Thegeneralfeaturesofthesearrangementsare:
theyarevoluntarycontractscontainingasettlementofxpenceinthepound,thatis,youdonotpayyourdebtsinfull
and

My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you work
out a budget and give you a personalised action plan setting out practical steps to deal with your debts.
www.mymoneysteps.org

Freephone0808 808 4000

www.nationaldebtline.org

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Bankruptcy
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October2014

theyrequirefulldisclosureofyourassetsandliabilities,butunlikebankruptcyortrustdeedsyourassetswillnot
transfertoatrustee,soyouwillbeallowedtokeepyourpossessions.
Ifyoubreachthetermsoftheagreement,failtodiscloseassets,ormisrepresentsomething,yourcreditorswillbeableto
startactionagainstyouagain.
Tosetupaninformalarrangementinshortsettlementyouwillneedthehelpofamoneyadviser,solicitororan
accountant.Solicitorsandaccountantswillchargeafeeforthisservice.

Debt arrangement scheme (DAS)

Ifyouhaveworkedoutyourbudgetandyouhavesomemoneyleftover,youmightbeabletojoinaDASdebtpayment
programme.ThereareanumberofadvantagestojoiningaDASdebtpaymentprogramme.
Youwillmakeoneregularpaymenttocoverallyourdebts.Thisismadetoanapprovedpaymentdistributor,whowill
sendthemoneytoyourcreditorsforyou.
Ifyoukeeptotheagreedpayments,yourcreditorswillnotbeabletousediligence(courtenforcement)againstyou.
DASfreezesinterest,feesandchargesonyourdebtsfromthedateyoumakeyourapplicationforaslongasyou
maintainthepayments.
Inordertoapplyforthisyouwillneedtocontactanapprovedmoneyadviser.Tosearchforanapprovedmoneyadviser
inyourarea,seewww.dasscotland.gov.uk.
Ifyouaresuccessfulinapplyingforadebtpayment
programme,apaymentsdistributorwillbeappointedtodealwith
yourcase.Thiswillallowyoutomakeonesinglepayment
whichwillthenbedistributedamongstyourcreditors.Ifyou
keeptotheagreedpayments,yourcreditorswillnotbeableto
usebankruptcyordiligenceagainstyou.

See our fact sheet:

Debt Arrangement Scheme
(DAS).

My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you work
out a budget and give you a personalised action plan setting out practical steps to deal with your debts.
www.mymoneysteps.org

Freephone0808 808 4000

www.nationaldebtline.org

Page 15 of 16

Bankruptcy
Scottish edition

Factsheetno.1

October2014

Useful contacts
AccountantinBankruptcy
1PennyburnRoad
Kilwinning
Ayrshire
KA136SA
Phone:03002002600
www.aib.gov.uk
DebtArrangementScheme
1PennyburnRoad
Kilwinning
Ayrshire
KA136SA
Phone:03002002770
www.dasscotland.gov.uk
InstituteofCharteredAccountantsofScotland
CAHouse
21HaymarketYards
Edinburgh
EH125BH
Phone:01313470100
icas.org.uk
BusinessDebtline
Phone:08001976026
www.bdl.org.uk

National Debtline endeavour to keep our fact sheets as up-to-date as possible, however, we cannot be held responsible for changes
in legislation or for developments in case law since this edition of the fact sheet was issued.
National Debtline is part of the Money Advice Trust. Monday Advice Trust Registered Charity Number 1099506. A company limited
by guarantee. Registered in England and Wales (Number 4741583). Registered office 21 Garlick Hill, London, WC4V 2AU.
Copyright National Debtline 2001.

My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you work
out a budget and give you a personalised action plan setting out practical steps to deal with your debts.
www.mymoneysteps.org

Freephone0808 808 4000

www.nationaldebtline.org

Page 16 of 16