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Renfrewshire Community Plan 2008 - 2017 Advice on bankruptcy
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A few facts on bankruptcy for people with serious financial problems
Bankruptcy is called sequestration in Scotland. It is the process whereby an individual is made bankrupt following an application to the Accountant in Bankruptcy. Bankruptcy usually lasts one year and during this period creditors cannot take legal action against a person to recover outstanding debt.
Bankruptcy is called sequestration in Scotland. It is the process whereby an individual is made bankrupt following an application to the Accountant in Bankruptcy. Bankruptcy usually lasts one year and during this period creditors cannot take legal action against a person to recover outstanding debt.
Normally, at the end of the one year term, the debt is written off, and the bankrupt person is discharged, however contributions can continue for up to 3 years.
Bankruptcy - how do I apply?
- You must owe more than £1500 and not have been made bankrupt within the last five years, and
- you must be 'apparently insolvent' or you have 'low income, low assets' (LILA).
- An authorised person, such as a money advisor certifies that you are unable to pay your debts as they fall due.
The most common ways you can show apparent insolvency are:
- 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, or
- you have received a statutory demand for payment, you do not deny the debt and you have failed to pay within three weeks of that demand.
- having an authorised person certifying you as being unable to pay your debts as they fall due
If you have a low income and low assets then this is a route into bankruptcy if you cannot prove apparent insolvency or if your creditor(s) are not pursuing sequestration. What does low income, low assets mean?
Low income means gross weekly income of no more than the national minimum wage for a 40 hour working week. Pensions or maintenance payments should be included in your income. If you receive income support, income based job seekers allowance or working tax credits you will be treated as meeting the low income test even if your actual income is more than 40 times the national minimum wage.
Low assets means you have no single asset worth more than £1000 and your total assets are not worth more than £10,000. In addition, it means that you must not own or jointly own a house or any other property or land. Your income, pensions, maintenance payments, benefits, tax credits and the income of other family members may be taken into account when considering whether you should pay a contribution while you are bankrupt.
There are other ways to petition the court for your own sequestration, including provisions for those who have been made bankrupt within the last five years. For more information contact Advice Works. (See details below.)
What are the main advantages of bankruptcy?
- Creditors will stop pursuing you for debts.
- You may have more money to spend on housekeeping.
- After one year, (unless there is a good reason) you will be discharged.
- You do not have to appear in court.
- If you own your home, it may be sold.
- Luxury goods such as widescreen TV or non essential car, can be sold.
- You may find it difficult to get credit, including mortgages in the future.
- It is a criminal offence to borrow more than £500 without first telling the lender that you are an undischarged bankrupt.
- You may have difficulty in operating a bank account. Some banks may also chose to close any current accounts you hold with them.
Your bankruptcy is recorded in a public register of insolvencies. A member of the public can search this register but there is a charge.
Does bankruptcy cost anything?
It will cost you £100 to apply for your bankruptcy, which is non-refundable. There are no waivers or exemptions for this fee.
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.
For further advice and information on bankruptcy
Contact Advice Works at:
Renfrewshire Advice Works
- email: adviceworks@renfrewshire.gov.uk
- phone: 01505 382328 (information/appointments) or 01505 381055 (benefit and debt helpline)
- fax: 01505 381058
- visit or write to: Advice Works, 8 Collier Street, Johnstone PA5 8AR
Useful Telephone Numbers:
Accountant in Bankruptcy: 0300 200 2600 or visit their website at www.aib.gov.uk
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