Recent amendments to the 1985 Bankruptcy Act in Scotland have meant big changes for people whose creditors petitioned for them to be made bankrupt or who applied for their own bankruptcy after April 2008.
How to Declare Bankruptcy in Scotland
The new regulations now allow a person who wishes to be declared insolvent to start the process using the Accountant in Bankruptcy rather than go to court.
Some of the conditions for applying for Low Income Low Asset Bankruptcy in Scotland:
- “You must owe a total debt of £1,500 or more
- You must be living in Scotland or have lived in Scotland during the last year
- You must not have been made bankrupt in the last five years
- The person must also meet one of the following conditions
- A creditor is willing to agree to you making yourself bankrupt
- You are apparently insolvent, that is you cannot pay your debts, as they are due
- A statutory demand from a creditor threatening to make you bankrupt if you do not pay your debt to them
- You have Low Income and Low Assets (LILA)”
What is Low Income Low Assets (LILA) Bankruptcy in Scotland?
LILA is a way into bankruptcy for: "Someone who cannot prove apparent insolvency or get creditor concurrence.”
Low Income
Low income in real terms means that someone wishing to declare themselves bankrupt must be earning no more than “ the standard minimum wage for a forty hour working week. This is equivalent to £229.20 per week.” It’s important to be aware that pensions and maintenance payments, if received, are taken into account.
If the person considering LILA bankruptcy receives income support or income based jobseekers’ allowance they will be considered as having met the low-income threshold even if the actual income is above £229.20
On top of that, earnings which may include wages, tax credits, pensions and other forms of income from family members within the household, may be taken into consideration when a calculation is made as to whether a person should make a financial contribution while bankrupt.
Low Assets
The Account in Bankruptcy defines low assets, as a person who has no: “Single asset worth more than £1,000 and their total assets are worth £10,000 or less. It also stipulates that a person cannot wholly or jointly own a house, other property or land.
As the number of bankrupts using this route increases there is a warning from The Institute of Chartered Accountants in Scotland (ICAS) advising that Low Income Low Asset bankruptcy should not be regarded as a soft touch.
The ICAS further caution that those: “Involved in regulating the process to ensure that the proper resources, checks and balances are in place to ensure that the new regulation is used by only those who genuinely need it.”
The information in this short article is sourced from the Accountant in Bankruptcy (Scotland’s Insolvency Service) and is by no means exhaustive. It essential therefore that anyone contemplating bankruptcy should take appropriate professional advice.
The Accountant in Bankruptcy is an agency of the Scottish Government
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