What is bankruptcy?

When you go bankrupt, you do not need to have money available to pay your debts. Your assets may be used to help pay off your debts. After a time (usually six months or one year) most of your outstanding debts are written off. A trustee is appointed to deal with your bankruptcy. Bankruptcy stops most creditors from taking further action against you. This could help you make a fresh start. 

You can apply for bankruptcy yourself or a creditor can apply to make you bankrupt.  

In Scotland, there are two types of bankruptcy: 

• Full administration bankruptcy (FAB). 
• Minimal Asset Process (MAP) bankruptcy.

Is choosing bankruptcy a good idea?

For some people bankruptcy can be a sensible solution to their debt problem. But it is important to consider all the ways you could deal with your debts.  

Think about the total amount of your debts and if you can pay them off. Also, take the following into account: 

• Your disposable income. 
• The likely length of a repayment programme. 
• Your age and health. 
• Your assets, including your house, and the impact of losing them in bankruptcy.  

You must speak to a money adviser before you can go bankrupt. Contact us for advice about how to find a money adviser near to you.

What are the advantages of bankruptcy?

• Bankruptcy is often a straightforward procedure. 
• Relief from the stress of being in debt. 
• Having your debts written off. 
• Being able to start again.

What are the disadvantages of bankruptcy?

• The possible loss of some assets. 
• A trustee has wide powers over your financial affairs. 
• Some jobs can be affected. 
• You cannot hold public office and you cannot serve as a company director unless the sheriff court agrees. 
• You cannot take out credit of more than £2,000 unless you tell the creditor about your status. 
• You cannot take out any credit if at that time you have debts of at least £1,000. 
• The bankruptcy will be listed on your credit reference file for six years. Even after this it can still be difficult to get credit, such as a mortgage.

What are the main features of full administration bankruptcy (FAB)?

• Most debts are included. 
• You must owe at least £3,000. 
• Your debts will usually be written off after one year. 
• You may have to pay a fee of £150.  
• Unless your only income is from benefits, you may be asked to pay an amount towards your debts for four years. Your trustee will decide how much you need to pay towards your essential living costs and what you can afford to pay towards your debts

What are the main features of Minimal Asset Process (MAP) bankruptcy?

• Most debts are included.
• You must owe no more than £25,000.
• Your debts will usually be written off after six months.
• There is no fee.
• You cannot own any land or buildings.
• Your total assets cannot be worth more than £2,000.
• Any single asset that you own cannot be worth more than £1,000. Although, if you own a car worth no more than £3,000 that you need, it will not be counted.
• You must show that you have no money to pay towards your debts, or that your income for the last six months has been from benefits only.