2. What is bankruptcy?
Bankruptcy starts when someone in debt (a debtor) is declared bankrupt by the sheriff or the Accountant in Bankruptcy. If you are declared bankrupt, it means that you have to hand over your estate (the things you own), including your home, to your trustee. Your trustee is the person who administers your bankruptcy. You will be able to keep some things that are essential for everyday living. You may be required to make some payment from your income.
It is the duty of your trustee to sell your assets or property and to use the money to:
- pay the costs of managing your bankruptcy; and
- pay your creditors as much as possible of what you owe them.
Your creditors are the people or organisations that are owed money by you. Subject to certain conditions, a creditor can apply to a sheriff to make you bankrupt or you can apply to the Accountant in Bankruptcy to make yourself bankrupt. In Scotland bankruptcy is sometimes called sequestration.