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Flashcards in Bankruptcy Deck (87)
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What is bankruptcy?

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


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


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.


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.


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.


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.


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.


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


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


What is minimal asset process (MAP)?

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


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...


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.


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


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.


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.


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.


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.


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.


What is DCO contribution for those awarded bankruptcy under MAP?

- ZERO, and no contribution will be made.


How long do DCO's generally last for?

- 48 months


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.


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.


What is 'Apparent Insolvency'?

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


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.


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.


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?

- 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.


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.


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)


Can a CoS be used to declare bankruptcy?

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


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.