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Wanting to go bankrupt?

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Wanting to go bankrupt?
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  See our fact sheet: Trust deeds. What is bankruptcy? Bankruptcy is an option to consider when you have reached the stage of being unable to repay your debts over a realisticperiod. Bankruptcy may be an option where you simply cannot reach agreement with your creditors and your financialsituation has become very difficult to manage.You are likely to be under a lot of pressure, with a number of your creditors competing to collect their debt from you.In Scotland, the word ‘bankruptcy’ is used loosely to describe two different situations. Sequestration Sequestration is the word used to describe the legal process by which you are formally declared insolvent (bankrupt). Insolvent means that you cannot pay your debts as they become due. In this fact sheet we will use the words ‘bankruptcy’and ‘sequestration’. Informal bankruptcy This is known as a ‘trust deed’. A trust deed involves making anoffer to put your disposable income and your assets towardspaying as much of your debts as possible. Creditors whoaccept this offer agree not to enforce payment of the remainder of the debt that they are owed. See Alternatives tobankruptcy  later in this fact sheet for more information on trustdeeds.This fact sheet gives information about making yourself bankrupt and when a creditor can make you bankrupt.Before you consider bankruptcy, you may want to look at whether any of the alternatives to bankruptcy might be better for you. See Alternatives to bankruptcy  later in this fact sheet. Choosing bankruptcy For some people in debt, bankruptcy can be something that they try very hard to avoid. For others, it is the mostsensible solution to their debt problem. If you are worried about a creditor making you bankrupt, see How can acreditor make me bankrupt?  later in this fact sheet. Freephone 0808 808 4000 www.nationaldebtline.org October 2014  Scottish edition Bankruptcy Fact sheet no. 1   My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you workout a budget and give you a personalised action plan setting out practical steps to deal with your debts.www.mymoneysteps.org Freephone   0808 808 4000 www.nationaldebtline.orgPage 1 of 16  Extra advice: think carefully aboutbankruptcy No single criterion should completely out-weighthe other. It may be a mistake to choosebankruptcy just because of the size of your debts. You should weigh up the advantagesagainst the disadvantages. Talk to a local moneyadvice centre, law centre, citizens advice bureauor contact us for advice .Before you can decide to go bankrupt, consider all the possibleways you could deal with your debt problem. This will includetaking into account:the total amount of your debts;the likelihood of being able to repay your debts; and your ability to deal with your debts. Also, take into account:your disposable income;the likely length of a repayment programme;  and your age and health.You should also consider your assets and the effects of losing them in bankruptcy.  Assets could include:your house;your business; and other valuable items.Bankruptcy is often a straightforward procedure and the advantages  are likely to be:relief from the stress and anxiety of being in debt;having your debts written off, or ‘discharged’, after 12 months ; and being able to build a new life.The main disadvantages  of bankruptcy are:the possible loss of certain assets, particularly your home;that the trustee has wide powers over your financial affairs;that certain types of job can be affected (see Will my job be affected?  later in this fact sheet for more information);that you cannot hold public office (for example, as an MP, MSP, councillor, or member of a school board) and youcannot serve as a company director unless the sheriff court agrees;you cannot apply for credit of more than £500 unless you tell the creditor about your status; and the bankruptcy will be listed on your credit reference file for six years. Even after this period it can still be difficult toget credit, such as a mortgage. This is because lenders may ask whether you have ever been bankrupt. October 2014 Bankruptcy  Scottish edition Fact sheet no. 1   My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you workout a budget and give you a personalised action plan setting out practical steps to deal with your debts.www.mymoneysteps.org Freephone   0808 808 4000 www.nationaldebtline.orgPage 2 of 16  Information: help with the fee If you are eligible for help from a solicitor throughthe ‘Advice and Assistance Scheme’ (for example, you receive Income Support or another income-related benefit), your solicitor may beable to pay the bankruptcy petition fee andreclaim it from the Scottish Legal Aid Board. How do I go bankrupt? In order to petition for your own bankruptcy you must:have debts of over £1,500 ;live in Scotland, or have lived in Scotland sometime during the last year  ; and not have been sequestrated in the last five years .In addition, you must also be able to show that you:are eligible under the low income and low asset rules (see the later section What are ‘low income low asset’bankruptcies? ); or  are apparently insolvent (see What is apparent insolvency?  later in this fact sheet); or  have been given a formal ‘certificate for sequestration’ by an approved person, such as a money adviser, to say thatyou cannot pay your debts (see What is a certificate for sequestration?  later in this fact sheet).These three routes into bankruptcy are explained in more detail in the following sections. How much does it cost? From 1 June 2012 , you have to pay a fee of £200 to makeyourself bankrupt. It is possible to pay the fee by instalments,but there are no exemptions to paying it. Contact us for advice about possible sources of financial help if you cannotafford the fee.There are full details in the bankruptcy application pack abouthow to pay the non-refundable fee. Payment can be made bycash, cheque, debit card or postal order and you can pay bypost, in person or at a bank. What are ‘low income low asset’ bankruptcies? Low income low asset (LILA) bankruptcies are a special scheme for people wanting to go bankrupt who meet certaincriteria. You must have a gross weekly income of no more than the standard national minimum wage for a 40-hour  working week, and low assets (see Do I have assets?  later in this fact sheet). The big advantage of this route intobankruptcy is that you do not have to prove ‘apparent insolvency’. October 2014 Bankruptcy  Scottish edition Fact sheet no. 1   My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you workout a budget and give you a personalised action plan setting out practical steps to deal with your debts.www.mymoneysteps.org Freephone   0808 808 4000 www.nationaldebtline.orgPage 3 of 16  Information: vehicles  A car up to the value of £3,000 that youreasonably need will not be counted as an assetwhen you apply for bankruptcy under the LILAscheme. Information: average income If you apply for bankruptcy under the LILAscheme, think about your income over theprevious 12 weeks . If, on average, this worksout to be more than £260 per week , your bankruptcy application will usually be refused. Warning: statutory demands If you have been sent a statutory demand andyou do not want to be made bankrupt, you willneed immediate advice. See How can acreditor make me bankrupt?  later in this factsheet for more information.You will be able to make an application for your own bankruptcyunder the LILA scheme if:you do not own your own home;you have no asset worth more than £1,000 ;your total assets are worth less than £10,000 ; and you have a ‘low income’. You will be classed as having a low income if your earnings(before deductions for tax and national insurance contributions)are no more than £260 per week . If you receive:Income Support;income-based Job Seeker’s Allowance;income-related Employment and Support Allowance;Working Tax Credit;Housing Benefit;help paying your council tax bill from the council;Pension Credit; or  Universal Credit;you are likely to meet the low income test, even if your actual income is more than £260 per week . Contact us for advice. What is apparent insolvency? ‘Apparent insolvency’ is a legal term meaning that you cannot pay your debts as they become due. You will only beapparently insolvent in certain circumstances. The most common circumstances are as follows.You have received a ‘charge for payment’ and the 14-day time limit for payment has passed without you paying thedebt. A charge for payment is a formal request in writing thatyou pay the amount owed. It will have the words ‘charge for payment’ printed across the top. A creditor has served a notice on you called a ‘statutorydemand’, requiring you to pay off a debt within 21 days of the date of the demand and you have not paid the debt.  October 2014 Bankruptcy  Scottish edition Fact sheet no. 1   My Money Steps is our free, independent and confidential online debt advice service. My Money Steps will help you workout a budget and give you a personalised action plan setting out practical steps to deal with your debts.www.mymoneysteps.org Freephone   0808 808 4000 www.nationaldebtline.orgPage 4 of 16
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