Bankruptcy

Bankruptcy (England, Wales & Northern Ireland) Sequestration (Scotland)

What is bankruptcy?

Personal bankruptcy, or Sequestration as it is known in Scotland, involves the transfer of your assets and property to the Insolvency Practitioner (known as a Trustee) on behalf of your Creditors.

Bankruptcy is the very last resort should no other debt solutions be suitable for your circumstance. In many cases bankruptcy can be avoided provided advice is sought and taken early enough.

The Trustee becomes responsible for the sale of your assets (house, car, valuable items, savings and investments etc) for the benefit of your Creditors. Bankruptcy protects you from people you owe money to but you need to think very carefully about the implications it will have.

Although the bankruptcy will only last a relatively short period of time there are numerous long term implications including the impact on your credit rating. Your sequestration will remain with Credit Reference Agencies for up to fifteen years after your discharge making it increasingly difficult to obtain bank accounts, credit cards, apply for a mortgage or loan.

Advantages

1. Once you have been declared bankrupt, your Creditors will be unable to pursue you or take legal action against you, to recover what they are owed.
2. You can expect to be discharged from the bankruptcy within a relatively short period of time – but there can be long term implications.
3. You will not have to make any further payments to your Creditors.
4. Income derived from benefits will be yours to keep and will not be affected.
   

Disadvantages

1. An adverse credit rating may exist for up to 15 years affecting your ability to take out a mortgage, open bank account or sign up for a credit card.
2. All of your assets will be sold to pay off your Creditors including your car, house and possessions.
3. If you decide to go bankrupt the court will be involved. Information about your bankruptcy and your assets will be made public as well as appearing in the Edinburgh Gazette.
4. You may also be ordered to make a contribution from future income and if this is the case will continue to pay your Trustee any surplus disposable income which you have.