Renfrewshire Council

Bankruptcy

Bankruptcy is the process whereby an individual is made bankrupt following an application to the Accountant in Bankruptcy.

Bankruptcy usually lasts one year. During this period creditors cannot take legal action against a person to recover outstanding debts. Normally at the end of the one year period, the debt is written off and the bankrupt person is discharged.

Advantages of bankruptcy

  • Creditors will stop pursuing you for debts.
  • You may have more money to spend on housekeeping.
  • After one year (unless good reason), you will be discharged.
  • You do not have to appear in court.

Disadvantages of bankruptcy 

  • If you own your home it may be sold.
  • Luxury goods can be sold to pay the cost of your sequestration.
  • You may have difficulty operating a bank account.
  • If you earn more than you need to maintain a reasonable standard of living for yourself and your family, you may be asked to contribute towards your sequestration.
  • Certain types of employment may be at risk if you go bankrupt, for example certain legal or financial professions. You should seek advice.

How do I apply for bankruptcy?

 

You must owe more than £1500 and not have been made bankrupt within the last 5 years.

The most common ways you can apply for bankruptcy are:

1. If you have low income and low assets (LILA)

Low income means that your gross income (i.e. before income tax and other deductions are taken off) is not more than the equivalent of the National Minimum Wage for a 40 hour week (as at 1 October 2012 that is £247.60 per week) and/or you receive Income Support, Employment Support Allowance, Income based Jobseekers Allowance or Working Tax Credit.

Low assets means that you do not have car or other motor vehicles worth more than £3000 or another single asset worth more than £1000, e.g. cash/jewellery or total assets worth more than £10,000. If you own a house, you cannot apply for a LILA Bankruptcy (although you may qualify under sections 2 or 3).

2. You have had a 'Charge for Payment' served on you by Sheriff Officers or have received one by recorded delivery and the Charge has expired.

A charge may be served either after you have been taken to court for a debt or in respect of unpaid Council Tax.

3. An Authorised Person, such as a Money Advisor, certifies that you are unable to pay your debts as they fall due.

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