Bankruptcy in Scotland: How does this work


Bankruptcy in Scotland: How does this work


You hear about people going bankrupt all the time, and if you are struggling with debt you might even be considering it for your own situation.

But how do you go bankrupt? What is the process?

We’ve created a step by step guide on how to claim bankruptcy and hopefully answer any questions you might have.

An overview of Bankruptcy in Scotland

In Scotland, bankruptcy is known as Sequestration, and the process is different compared to the rest of the country.

You can either claim bankruptcy yourself through a money advisor to the Accountant in Bankruptcy (AIB) Scotland or be declared bankrupt by a lender via the Sheriff Court.

If you go bankrupt in Scotland, your finances will be supervised by a Trustee, who will take control of your assets to try and pay back as much of your debt as possible.

The 4 steps to going bankrupt in Scotland

We decided to break it down and give you an insight into how the process works. We’ve laid out the four steps to going bankrupt below:

Step 1: Do you qualify?

The first step, before you do anything else, is to make sure you fit the criteria to be able to go bankrupt.

In order to apply you must:

  • Live in Scotland, or have lived in Scotland for at least six months
  • Owe more than £3000
  • Not have claimed bankruptcy within the last five years

If you have a debt level under £17,000 with no disposable income and very little assets, you may be able to apply for another form of bankruptcy called the Minimal Assets Process (MAP). You can also apply for this if you have no income and rely solely on benefits.

Step 2: Is it right for you?

The next step is to make sure that bankruptcy is the right option for you. It can sometimes feel like your only option, but there are others out there that may suit your situation better.

Bankruptcy is encouraged to be the last resort when dealing with your debts. It’s a big decision to make and it’s important to make you that you get it right as the process is very hard to reverse.

It’s important to consider all your options before you decide. You need to consider things such as:

  • Your overall debt level
  • The probability of being able to pay anything towards your debts
  • What you earn
  • What will happen to your assets such as your house or car

It’s always best to contact a money advisor to discuss your situation. They can confirm whether you qualify and will check to see if there is an alternative that would be better for your circumstances.

Step 3: Application

If it’s decided that bankruptcy is the best solution for you, the next step is to apply. You will be given a Certificate for Sequestration, which allows you to apply, and your money advisor will help you to fill in an application.

It might also be required or requested for you to complete what is called a Moratorium. This is a document that will stop creditors taking any action against you for six weeks until your sequestration is in place.

Sequestration isn’t free; it will cost you £200 to submit your application. This is non-negotiable and there are no exemptions from this.

Step 4: Submit

Once you have completed the above step, it’s time to submit the application. It will be submitted by your advisor to the AIB who will aim to have it processed within five working days.

If they accept your application, you are then declared bankrupt. This is then recorded on the Register of Insolvencies.

What now?

So, the hard part is over and you are now officially bankrupt; now what?

Well once you become bankrupt, you’ll need to surrender all your assets to your Trustee. This includes your house, car, money and anything else that is considered to have financial value.

There are some exemptions to this. The terms of bankruptcy in Scotland will allow you to keep your car if it is valued at £3000 or less and you need it for everyday use.

This also goes for other objects that you may need for work, such as any tools or equipment, up to the value of £1000.

Household items such as your furniture and your clothes are not considered an asset and will not need to be surrendered.

Any other questions?


Yes, you read that right. A lot of people believe that once you claim bankruptcy, that’s the end; but that, unfortunately, isn’t always the case.

When you apply for bankruptcy in Scotland, an overview of your income and expenses is conducted. If it’s found that you have some spare cash after paying all your bills, you will be expected to pay this into your account each month.

The payments will cover the cost of the bankruptcy as well as going towards paying back your debts.  This is known as a Debt Contribution Order and will generally last about four years.

Your house

Your home is one of, if not the, biggest assets you own, and unfortunately, if you are a homeowner, this often means that it’s a major factor in your bankruptcy.

When you apply, your advisor will check if there is any equity in your home; which is essentially the value of your house minus the cost of your mortgage.

If it is found that there is equity in your home, your Trustee might have to sell it. If the property is jointly owned, the other person(s) will have to agree to the sale.

Should you refuse to sell your home, your trustee will apply to the court to obtain a court order which will, essentially, force the sale.

If it turns out that there is no equity in your home, selling your home becomes unnecessary. However, if it remains unsold by the time you are discharged, it will still be considered as an asset. This means if the property market increases, your home may still be sold in the future.

At Carrington Dean, we understand that your debt can become the elephant in the room, but it doesn’t have to be. If you are struggling with debt and are unsure where to turn, call us today and speak to one of our expert advisors.

You could write off up to 75% of unsecured debt with our debt assistant.

Get help with debts today

Latest Articles


Scottish Decrees

When you’re struggling with debts, you may have come across a decree, and it’s something we’re asked about often. That’s why we thought we’d shed some light on the things you need to know about ...


What is a Moratorium?

Are you thinking of applying for a debt solution such as a Trust Deed or Debt Arrangement Scheme (DAS), but need more time to mull it over and are worried about what your creditors are ...


Council Tax: Attachment of Earnings – Things To Consider

If you’ve been struggling to pay your council tax, you may have received a letter notifying you of an arrestment of earnings. This can be a stressful and confusing situation to be in, so it’s ...