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 being fully aware of the alternatives and seeking advice at an early stage.
In Scotland, bankruptcy is sometimes called sequestration.
Bankruptcy starts when someone in debt (the debtor), applies for bankruptcy through a money adviser to the Accountant in Bankruptcy, or is declared bankrupt by one of their creditors through a Sheriff Court. The creditors are the people or organisations 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.
The person who administers a bankruptcy is called the trustee. They can be either the Accountant in Bankruptcy or an insolvency practitioner. If a debtor is declared bankrupt, it means their trustee has the legal authority to take action to recover funds via a regular contribution, or from any assets a debtor owns, including their home.
All assets, including property, will be investigated by the trustee and where necessary sold in order to:
- pay the costs of managing the bankruptcy; and
- pay creditors as much as possible of what the debtor owes them.
If you are a money adviser and require information about the Common Financial Tool (CFT) please select this link for guidance on how to apply the CFT.
In order to use the Common Financial Tool (CFT) and have access to the associated trigger figures, you need to apply for a licence. The CFT to be used is the Common Financial Statement as operated by the Money Advice Trust. For more information on this please visit: http://www.cfs.moneyadvicetrust.org/