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Bankruptcy in Scotland

Bankruptcy, sometimes called ‘sequestration’, is a form of insolvency allowing you to write off debt that would otherwise take many years to clear. It may be recommended for you if you’re unable to repay your debts in a reasonable time.

The rules for bankruptcy in Scotland are different from other UK countries. Bankruptcy in England, Wales or Northern Ireland has different benefits, risks and fees associated with it.

Bankruptcy may also involve selling assets you own, such as your house or car. Once bankruptcy is completed, your unsecured debts are usually written off and you shouldn’t receive any further contact from creditors.

If your assets are worth more than your debts, or if you’re able to pay back your debts in a reasonable time, bankruptcy might not be your best option.

Bankruptcy may also make it more difficult to get credit as it will remain on your credit file for six years.

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How sequestration works

In order to apply for bankruptcy, you’ll need to have a ‘certificate of sequestration’ issued to you by an approved debt advisor like us. We can provide you with a certificate of sequestration if it’s established that bankruptcy would be beneficial for you.

Alternatively, you can apply for bankruptcy if you’re ‘apparently insolvent’. This means a creditor has demanded full payment from you, but you’re unable to pay this. 

The following situations show you’re apparently insolvent:

  • You’ve been sent a ‘charge for payment' more than 14 days ago and you’ve not paid the debt
  • You’ve been sent a ‘statutory demand’ more than 21 days ago and you’ve not paid the debt

A creditor could also make you bankrupt if you’re apparently insolvent and you owe them more than £3,000.

Free multilingual debt guide

We've put together a free, downloadable guide to help you deal with your money worries

Our guide to dealing with debt in Scotland covers debt collection processes, where to get help, budgeting and what to expect from a debt advice session. It’s available to download in English, Urdu, Punjabi and Polish. Find out more.

Sequestration criteria

You may be eligible for bankruptcy if:

  • Your debts total more than £3,000. If your debts are less than £3,000 you may be able to apply for a MAP bankruptcy.
  • You’ve been a resident of Scotland or have lived in Scotland in the last year
  • You haven’t been made bankrupt in the last five years

How much does bankruptcy cost?

In order to apply for sequestration, you must pay a £150 fee to the accountant in bankruptcy. This fee may be reduced to £0 for those receiving certain benefits, including when those benefits are not your sole income.

How long does bankruptcy last?

Sequestration normally lasts for a year. During this time you must not borrow any more credit and you must inform the Accountant in Bankruptcy (AiB) of any change in circumstances. AiB are responsible for administering the process of personal bankruptcy in Scotland.

You may have to make a contribution from your earned income to your bankruptcy. This will be determined after your income and expenditure has been checked and will normally be for four years.  If your circumstances change you can ask the AiB to review this.

What debts are written off in bankruptcy?

Most debts are written off by bankruptcy. Some debts will not be written off, including student loans, criminal fines, fraudulent debts and child maintenance arrears.

Do I have to sell any assets?

There’s a chance that you’ll need to sell valuable assets such as a vehicle or your house. You can keep the things you need for day-to-day living.

Will my details be registered anywhere?

Your details will be added to the Register of Insolvencies (ROI), for a period of five years.

Could sequestration affect my job?

Bankruptcy may have implications for your job. You won’t be able to act as a company director for instance. Usually, you can check the details of your employment contract to find out where you stand. If you’re concerned that bankruptcy may affect your employment, you must let your debt advisor know. 

Can you give Scottish bankruptcy help?

If you’d like to find out if bankruptcy is the right option for you, our online debt advice tool can help.

If it’s the best solution for your situation we’ll book you an appointment with one of our specially-trained Scottish debt advisors.