While many debt solutions depend on using your monthly income to establish a new range of repayments or using your home to raise funds to repay debts, many people who do not own their own home or who are on benefits can be left unsure about how to tackle their debts quickly and effectively.
Recognising this problem, the Scottish Government introduced a new route into bankruptcy for those with few assets or surviving on low income who had found themselves in debt in 2015. The new Minimal Asset Bankruptcy procedure was established for those meeting particular criteria which are common among many people seeking a debt solution, but which can make other options of working to become debt free impossible.
How will I know if I am eligible for MAP Bankruptcy?
MAP Bankruptcy is only available to those with debts amounting to at least £1500, but not exceeding £17,000, whose total assets do not exceed £2000. It is not available to home-owners or land-owners, and in order to enter MAP Bankruptcy you must prove that you have no disposable income which can be used to pay creditors. Like the standard bankruptcy procedure it requires the involvement of an approved Insolvency Practitioner or Money Adviser, and you must provide a signed Certificate of Sequestration.
While you must not have assets amounting to more than £2000, you must also have no single asset which is worth more than £1000 – although your car is excluded from this assessment, provided it is worth less than £3000 and you are able to demonstrate that you need it. MAP Bankruptcy is only open to those who have been on benefits for at least six months, and who have not become bankrupt during the previous five years or used the MAP Bankruptcy procedure during the previous 10.
If I choose MAP Bankruptcy, how do I begin the procedure?
Before taking the first steps towards MAP Bankruptcy, you should speak with a Money Adviser to build a picture of your personal finances. Our highly trained team of advisers have become experienced with this procedure since its introduction in April 2015, and can guide you through your application for MAP Bankruptcy, outlining what you can expect throughout the whole process.
When you contact one of our team, your income and expenditure will be assessed using the Common Financial Tool, which was introduced by the Scottish Government in order to establish a standard method of assessing an individual’s ability to make repayments towards their debt and, over a sustained time period, ultimately clear the amount they owe.
Once it has been determined that you are unable to pursue any other debt solutions, you must then make an application, which will require the approval of the Accountant in Bankruptcy. The AiB will also appoint a Trustee to you for the duration of the process. This Trustee will remain in office for six months after the conclusion of your MAP Bankruptcy. In order to submit an application you must also pay an application fee of £90.
What will happen once my application has been approved?
After your application has been awarded the procedure will conclude with you being discharged after a period of six months, provided you have met the terms outlined at the beginning of the MAP Bankruptcy. Although the discharge will conclude the process, some restrictions will remain. These will include limits on accessing more credit and restrictions on taking part in certain business transactions for a further six months.
What are the long-term effects of using MAP Bankruptcy to tackle my debt problems?
While the MAP Bankruptcy process can provide an effective method of becoming debt free, it also has several long-term effects which can have an impact on your financial future and you should be sure to familiarise yourself with the negative aspects of the procedure as well as the benefits.
Although it is one of the few viable options for those on benefits and who struggle to afford the contributions towards establishing a debt solution, or who do not have the assets to raise funds to meet their debts, it will however affect your credit rating and your ability to obtain credit in the future. Your details will also remain on the Register of Insolvencies for a full year after the conclusion of your MAP Bankruptcy, and you will be unable to enter the procedure again for a period of ten years.
Will MAP Bankruptcy have any effect on my living situation or employment?
Though the process is available to those with limited assets those assets may have to be sold in order to raise funds, and if your circumstances improve within the six months of your MAP Bankruptcy you may be required to enter the standard bankruptcy procedure (Sequestration). Following the conclusion of the MAP Bankruptcy you may also face certain employment restrictions or find that you are it affects your tenancy agreement either now or in the future.