New Changes to Bankruptcy in Scotland

This year new laws came into effect in Scotland, which mean that the way the Government deals with bankrupt citizens has changed. The changes came into effect on the 1st April in 2008 and despite the choice of date, it was no April fool.

The rules that stood before these changes, still apply to any petitions that were sent to Courts before the 1st April and anyone who was made bankrupt before the 1st April should still follow the old guidelines. Under the new laws, contributions will be taken from the debtor's income during their bankruptcy for approximately 3 years and Student Loans cannot be written off by becoming bankrupt.

Scottish Bankruptcy - All change

A borrower who wanted to declare bankruptcy had to wait until their creditors took legal action, but now, thanks to the new changes in law, anyone who wishes and fulfils certain criteria (see below) can apply for their own bankruptcy to the 'Accountant in Bankruptcy'. The minimum amount, which they must owe in order to qualify for bankruptcy, has also changed from a previous figure to a minimum of £1,500 for a self-declaration. However, if a lender wants to declare one of their customers bankrupt they must be owed a higher minimum amount of £3,000.

Sequestration

Sequetsration is personal bankruptcy and this can be petitioned for by any individual who meets certain requirements. Here a couple of most common requirements, although there are others. As mentioned above your debt must be over £1,500; there must be an expired charge for payment outstanding which you have made no payments on or a poinding - usually for Council Tax arrears - following on a summary warrant. If you don't meet these requirements then you can't petition for your own bankruptcy.

Sheriff Courts

The new laws have also awarded all bankruptcy cases to Sheriff Courts only, meaning that The Court of Session will no longer deal with any bankruptcy cases. A Sheriff can also delay a decision on a petition for bankruptcy for as long as they like, or give a troubled borrower a special 'agreed payment plan' to escape a bankrupt verdict. Using an agreed payment plan those in financial difficulty can pay off their outstanding debt gradually and to a tune that won't lower their standard of living. For those who are already on a low income, other aspects of the law now apply. If a borrower has no property and little to no savings or assets, they will be termed differently and known by the Sheriff Courts as Low Income Low Assets (LILA). The period for bankruptcy has also changed from being a 3 year term to just 1 year.

If a bankrupt borrower behaves unfavourably while they are bankrupt, the period for bankruptcy can be extended from 1 year to as long as the Sheriff Court Administration sees fit. A bankrupt borrower will not be discharged until the case has been formally completed. A bankrupt debtor can also only appeal against the amounts that are declared in their trustee's accounts if they can prove that they will be better off financially as the result of an appeal. For those who don't do as the new laws dictate certain new rules apply. If a bankrupt borrower is uncooperative with the Sheriff Court or illegally borrows during their bankruptcy, they could face a Bankruptcy Restriction Order (BRO) or Bankruptcy Restriction Undertaking (BRU). These orders prevent those who are bankrupt from taking part in certain employment opportunities and from getting certain types of credit for between 2 and 15 years from the time they are given the order.