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Flashcards in Bankruptcy Deck (87)
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1

What is bankruptcy?

Bankruptcy (or sequestration) is a legal declaration in Scotland that someone is unable to pay their debts.

2

What may an individual do (or have done to them) if they are unable to to pay debts as due?

- They may be able to apply to the AiB for their own bankruptcy
- Alternatively creditors or a trustee in a trust deed may apply to make you bankrupt by petitioning the SC

3

What happens to an individual who is declared bankrupt?

- Control of things that are your own, including your home, is passed to a trustee (the person who administers your bankruptcy).
- The trustee may sell assets to pay off your creditors.
- You may also be required to make regular payments from any income to satisfy payments to creditors as well.

4

What are the consequences of being bankrupt to: EMPLOYMENT?

- Some emplyoers will not allow bankrupt persons to work for them.
- A person who has declared bankruptcy should always CHECK TERMS OF THEIR CONTRACT and BE TRANSPARENT WITH EMPLOYER before undertaking to sign an application form.

5

What are the consequences of being bankrupt to: CREDIT RATING?

- A bankrupt person's credit rating will become affected for a substantial period of time
- The result being they will find it hard to obtain credit in the future.

6

What are the consequences of being bankrupt to: BANK ACCOUNTS?

- A debtor's bank may freeze or close their accounts, meaning they will be tasked with opening an account with a new bank.
- If the debtor receives income or benefits in to an account with them they may continue to allows this.

7

What are the consequences of being bankrupt to: PUBLIC RECORDS?

- All person's who are declared bankrupt are registered in the Register of Insolvencies.
- Creditors and credit reference agencies can therefore check the RoI before granting potential customers credit to check with they are (or have been) bankrupt.
- RoI can be searched by anyone.

8

What are the consequences of being bankrupt to: SERVICE PROVIDERS?

- Bankruptcy may cause some service provides to change the way in which payment is made to them to provide their service.
- Gas/Electric companies may install a meter or set up a pre-payment plan

9

Who can be made bankrupt?

- Individuals, including sole traders
- some businesses and partnerships
- trusts
- unincorporated organisations
- Deceased individual's estate can be made bankrupt by executor

10

What is minimal asset process (MAP)?

A means of applying for bankruptcy for those with low income and minimal assets.

11

If applying under MAP for bankruptcy a single asset can be worth no more than £....?

- £1000
- This excludes a vehicle worth up to £3000 which is reasonably required for work etc...

12

If applying for bankruptcy under MAP what must the TOTAL VALUE of ALL assets be?

- No more than £2000 for all assets excluding a car worth £3000 which is reasonably required.

13

If applying for bankruptcy under MAP can you own your house, and what can your debts NOT exceed?

- NO, a debtor applying under MAP cannot own their house either solely or jointly ( as well as any other property or land)
- Debts must be no more than £17,000

14

To qualify for MAP must an individual be in receipt of state benefits?

- YES, for a period of at least 6 months
- OR they must have been assessed by the state as not required to make contribution towards their bankruptcy.

15

An individual wishing to qualify for MAP must provide a certificate of sequestration: What is it?

- A certificate which provides documentary proof that a debtor is insolvent.
- When applying for MAP this must me provided and signed by a qualified money advisor.

16

After satisfying all MAP criteria what will the AiB do?

- The AiB will conduct checks to ensure all information provided by the debtor is accurate.
- A debtor may be asked to provide additional evidence to support their application.

17

If a debtor is applying for MAP and cannot provide additional evidence, or his declaration is found to be inaccurate what may happen?

- The debtor's application will likely be rejected with the fee being retained.

18

What is a Debtor Contribution Order (DCO)?

- A DCO is required in all bankruptcies, it is a fixed amount of contribution that a debtor is required to pay during their bankruptcy.

19

What is DCO contribution for those awarded bankruptcy under MAP?

- ZERO, and no contribution will be made.

20

How long do DCO's generally last for?

- 48 months

21

If a bankrupt debtors circumstances change before they are discharged from their bankruptcy what will happen in respect of their DCO?

- A re-assessment of their income and expenditure will take place.
- If it is found that the debtor now has a surplus income they will be required to pay a contribution each month for the remained of the DCO period, subject to change in circumstances.

22

How long does bankruptcy last under MAP?

- Bankruptcy award under MAP will discharge the debtor after 6 months.
- The debtor's trustee will remain in office for another 6 moths to finalise the bankruptcy.

23

What is 'Apparent Insolvency'?

A legal term by which means one cannot pay their debts as thy become due.

24

One way of proving Apparent Insolvency is by using a Charge for Payment. Explain what it is and how it provides proof.

- A Charge for Payment is a legal document titled 'Charge for Payment'.
- It means that a debtor owes a creditors money and the amount due should be paid within 14 days.
- Failure to make a payment to the creditor within that period will provide proof from the 15th day that the debtor is Apparently Insolvent.

25

A Statutory Demand is another way of proving Apparent Insolvency. What is this and how does it provide such proof?

- A Statutory Demand is a legal document titled "Statutory Demand".
- This is a final formal demand for payment and if not paid by the creditor within 21 days of issue the document expires and provides proof that the debtor is Apparently Insolvent.
- The proof date can be any date from the 22nd day onwards.

26

As an alternative to bankruptcy a debtor may take up a Debt Arrangement Scheme and agree to a Debt Payment Programme. Does Revocation of a DPP constitute Apparent Insolvency?

YES
- Apparent Insolvency may be constituted by a revoked DPP.
- If a DPP is revoked AND a creditor has taken up legal action against the debtor then either the debtor or creditor can apply for bankruptcy.
- A revoked DPP therefore is proof of Apparent Insolvency.

27

What is a Certificate of Sequestration?

A certificate granted by an authorised person and certifies that a debtor has demonstrated to them that they are unable too pay their debts as they become due.

28

What sort of evidence may a debtor have to provide to an authorised person to be granted a CoS?

- Income
- Assets (funds in bank accounts)
- Liabilities (invoices and demand notices)

29

Can a CoS be used to declare bankruptcy?

YES
- provided this is done within 30 days of the issue of the CoS
- Any period after 30 days will render the CoS invalid.

30

Under what circumstances would a debtor be unable to apply through MAP for their bankruptcy?

- If the total value of debt owed exceeds £17,000
- If the total value of their assets is over £2000.