APPARENT INSOLVENCY
Certain conditions are needed for someone to be sequestrated (made bankrupt) in Scotland. They must be 'apparently insolvent' whether they are making themselves bankrupt or being sequestrated by someone else.
You will find the full legal meaning of apparent insolvency in section 7 of the Bankruptcy (Scotland) Act 1985.
However, the most common forms of apparent insolvency are shown below.
- A creditor has been to court, got a decree, and has had a charge for payment served on the debtor and the 14 days allowed for them to pay have passed without them making a payment.
- A creditor has served a statutory demand on the debtor telling them to pay the debt within 21 days and they have not paid the debt or sent the creditor a letter by recorded delivery denying that the debt is due for payment.
- A local or public authority has a summary warrant against the debtor to recover rates or taxes and some of their goods have been attached (or someone has tried to attach them) to the order, and 14 days have passed.
The debtor will also be apparently insolvent if any of the following apply.
- A creditor has a decree of adjudication from the Court of Session transferring the debtor's house or other property which can be inherited to them.
- A receiving order has been made against the debtor in a court in England, or Wales.
- The debtor is made bankrupt in England, Wales or Northern Ireland.
- The debtor has given written notice to his creditors that he has stopped paying their debts in the ordinary course of business. This only allows creditors to petition for sequestration. The debtor cannot petition just for these reasons.
- The debtor has signed a trust deed. This allows a qualified creditor to petition for sequestration. But, the debtor can only petition if the trust deed fails to become protected because their creditors object.
- A debt payment programme the debtor was party to has been revoked under the Debt Arrangement and Attachment (Scotland) Act 2002 and a debt being paid under the programme is constituted by decree or document of debt as defined in section 10 (attachment) of that Act.
Apparent insolvency also covers partnerships and unincorporated organisations (see section 7 of the Bankruptcy (Scotland) Act 1985).