Accountant in Bankruptcy

Bankruptcy is a formal method of dealing with debts if other options have failed or are inappropriate. The consequences of bankruptcy are severe and no one should make an application for bankruptcy without seeking advice.

Bankruptcy starts when someone in debt (a debtor) is declared bankrupt by the sheriff or the Accountant in Bankruptcy. If a debtor is declared bankrupt, it means that they have to hand over their estate including their home, to their trustee. The person who administers a bankruptcy is called the trustee. They can be either the Accountant in Bankruptcy or an insolvency practitioner.

A debtor will be able to keep some things that are essential for everyday living, however they may be required to make some payment from their income.

It is the duty of the trustee to sell the debtors assets or property and to use the money to:

• pay the costs of managing the bankruptcy; and

• pay creditors as much as possible of what the debtor owes them.

The creditors are the people or organisations that are owed money by the debtor. Subject to certain conditions, a creditor can apply to a sheriff to make a debtor bankrupt or a debtor can apply to Accountant in Bankruptcy to make themselves bankrupt.

In Scotland bankruptcy is sometimes called sequestration.

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