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Bankruptcy

(For bankruptcy information specific to Scotland, go here)

If you have enough equity in your assets you should pay off your debts - or a large portion of them immediately. Try asking for time to liquidise your assets if you can. Keep in mind that bankruptcy can be imposed for as little as a few hundred pounds.

If all else fails, you might have to contemplate bankruptcy. As a result, your financial affairs and many other areas of your life will be under scrutiny.

In order to satisfy debts, usually only your basic living expenses will be taken into account and the rest will be liquidated. A court will take the place of creditors and will assess the situation, reach a satisfactory solution, and impose the conditions upon you, the debtor.

Theoretically, the debt is taken away from the debtor and creditors are satisfied by the order of the court. After this, the creditors will have no further rights to request any more money.

The court appoints a receiver who will investigate every asset and formal relationship the debtor had, to accurately work out all their assets. The receiver may also contact other financial institutions, government departments, landlords, and anyone else they believe may harbour information regarding the assets. The receiver will report to the court and recommend an Income Payment order if they believe the debtor may have a certain amount of disposable income that would allow them to make repayments.

The debtor will have all their assets liquidated and the proceeds will be paid to the creditors.

In a bankruptcy you may be able to keep certain assets - these include:

  • Ordinary household contents
  • A modest motor vehicle
  • Benefit of a residential tenancy
  • Things you will need to continue your vocation or trade
  • Any money you may have in a pension fund, however, there may be different rules if your fund is very large.

A debtor is branded bankrupt for a period of 12 months and then discharged. After discharge, no further debts are owed but often institutions and individuals will ask if a person is a discharged bankrupt.