How to go bankrupt

If you're thinking about bankruptcy or any other debt solution you may able to apply for a moratorium. 

It's temporary relief from your creditors which stops them taking further action against you for 6 months. For example:

• arresting your wages
• taking any possessions
• starting any new court action 

You should check with a money adviser if a moratorium is right for you. You can apply yourself or through a money adviser. 

Check how to apply for a moratorium

There are 2 types of bankruptcy.

Which type you can apply for depends on your circumstances. The main things are how much you owe and whether you’ve assets or disposable income.

'Assets' are the things you own over the value of £1,000. For example, property, cars and jewellery.

'Disposable income' is any money you've left over after essential living costs. For example, rent or mortgage, food and utility bills.

A money adviser will discuss any 'assets' or 'disposable income' you have when you apply.

1. Minimal Asset Process (MAP)

• few assets and no disposable income
• owe less than £25,000

2. Full Administration

• do not qualify for MAP (usually because you do have assets or disposable income)
• owe at least £3,000

Read the full details about who can go bankrupt.

An approved money adviser needs to do a financial assessment to check if you qualify. 

Bankruptcy can affect things like your: 

• assets and income 
• bank account
• credit rating 
• work 

You should read:

• Before you go bankrupt
• Advantages and disadvantages of bankruptcy: Citizens Advice Scotland

You need to apply for bankruptcy through an approved money adviser. You cannot apply yourself.

The Scottish Government help to fund organisations to give free professional debt advice.

Get free debt advice

You can also get advice from an insolvency practitioner (IP).

Find a licensed insolvency practitioner

IPs may charge for their service. You should check this when you contact them.

There are other debt solutions available. You need to get advice first to check the right solution for you. 

You need to apply through an approved money adviser (or IP). They'll do a financial assessment and ask about things like your:

• income
• outgoings
• assets (if you have any)
• debts

You should have this information ready when you apply.

They’ll check if you qualify for bankruptcy and give you advice on the best solution for you. 

Get free debt advice

Find a licenced insolvency practitioner

They'll send an online application to a part of the Scottish Government called Accountant in Bankruptcy (AiB).

It costs £150 to apply. Some people do not need to pay a fee. The adviser will tell you if you need to pay when you apply.

AiB decides if you can go bankrupt.

You usually get a decision within 8 working days.

This is as long as AiB have all the information they need. They'll contact you if they need more information.

Bankruptcy application process

If you're awarded bankruptcy there are things you must do by law: 

1. follow bankruptcy rules
2. cooperate with the trustee

If you do not, your bankruptcy could be increased or you could break the law. 

You're usually 'discharged' from bankruptcy and its rules after one year.

But the full bankruptcy process can last 4 years or longer. If you need to make payments, you usually need to do this for 4 years.

You're bankrupt for 6 months if you go through the Minimal Asset Process (MAP). 

Read more about when bankrutcy ends