Declaring Bankruptcy in Scotland – The Myths
Written by Chelsea Potter on 8 July 2016There are many myths surrounding bankruptcy in Scotland so we thought it would be a good idea to put together a myth busting blog post. We hope this post will help clarify the current sequestration process and help you understand how this debt solution works – if however you have questions or would like to chat about your debt struggles, our advisers are always ready to help. Simply call us on 0800 280 2816 or request a call back and we’ll contact you.
‘I have to go to court to declare myself bankrupt’
A big myth surrounding bankruptcy is that you have to attend a court hearing where you sign a certificate to say you want to be made bankrupt. This is not the case.
Today, an approved money adviser must assess all the options available to you, which involves obtaining information about your assets, creditors and income and expenditure; and have decided that sequestration is the best option for you. Once they have recommended this they will send out a Debtor Application Pack to you that encloses a signed Certificate of Sequestration, this confirms that you cannot afford to pay your debts as they fall due. Once you have completed the application pack with all your details, your money adviser will then submit your application to the Accountant in Bankruptcy. They will then approve the application, award your sequestration and send you a letter to confirm this.
‘Once awarded my debts are wiped off and I don’t have to pay anything’
Another misconception is that the day you are declared bankrupt your debts are immediately written off and you don’t have to do anything. Again this is not the case.
Once awarded you will be appointed a Trustee who will oversee the duration of your bankruptcy and work in the creditors benefit in order to try and maximise the return to them.
If you have a surplus available, the money left over from your income once all essential expenditure has been deducted, you will be expected to make a regular contribution (usually monthly) for 4 years from the date your sequestration was awarded. This is called a ‘Debtor Contribution Order’. This money will then be distributed between paying the fees involved in your bankruptcy and paying back your creditors.
Your Trustee will also look to sell any non-essential assets that you may have to help contribute towards the return to your creditors.
‘Everyone in my town will find out that I am bankrupt’
Bankruptcies used to be published in the local paper however this is rarely done now, and if it is done it is in an exceptional circumstance.
Sequestrations are published on an online register called the Register of Insolvencies. This is where information is held for not only bankruptcies, but Trust Deeds, Moratoriums and insolvent companies. The Register of Insolvencies is a public register; therefore anyone can go on here and search somebodies details. If you apply for credit, lenders will often consult this register before they make their decision.
‘I own my property; therefore I will have to sell it’
Not everyone who is made bankrupt and owns a property will have to sell their property. For example, if you are in negative equity there will be no financial benefit for your Trustee to sell your property as there will be no money gained from doing so, likewise if you have minimal equity.
If you have equity in your property your Trustee will have discussed the impact on this before offering Sequestration as a solution, therefore it is always best to speak to a qualified money adviser about any concerns you may have as they will be able to outline the treatment of this to you on an individual basis.
If you are struggling with your finances and need help or advice, get in touch with PayPlan. Our advisers can talk you through a range of options that might be available.
Filed under Debt advice