Where a decree has been awarded in favour of a creditor and payment is not forthcoming after a charge for payment has been issued, a creditor may consider applying to make the debtor bankrupt to recover sums due. How can you use bankruptcy to recover debt in Scotland?

If a debtor is declared bankrupt, their full estate including their home will be handed over to the appointed trustee (usually the accountant in bankruptcy). It is the duty of the trustee to sell the debtor's assets to pay:

• The costs of managing the bankruptcy, and

• Creditors as much of what the debtor owes them as possible.

As a creditor you can apply to a Sheriff to award a bankruptcy against a debtor if;

• You are owed at least £3000 (including any fees, interest or charges added to the original debt); or
• You are applying for a joint petition with other creditors where the combined debts are at least £3000; and
• The debtor has been provided with a Debt Advice and Information Pack; and
• You can show the debtor is insolvent i.e. unable to pay their debts.

Before making an application to make a debtor bankrupt, a creditor should check if the debtor has already been bankrupt and if there is already a petition before the court for the debtor's bankruptcy.

Following an application for bankruptcy, debtors receive a warrant citing them to appear at court. If the debtor appears or is represented at the hearing, a Sheriff may postpone their decision if they are satisfied the debtor will pay their debt within 6 weeks or if they plan to repay the debt through the Debt Arrangement Scheme.

Once a bankruptcy award has been made, debtors:

Must;

• Co-operate fully with their trustees at all times; and
• Keep the trustee fully information of any changes in their circumstances.

Must not;

• Obtain credit of ?500 or more without informing the lender that they are bankrupt.
• Start up a limited company.

A debtor will normally be discharged from their duties one year after the date that the Sheriff issued the warrant citing them to appear at court. If a debtor does not comply with the trustee, the trustee can request to delay the discharge by up to two years at a time.

Every bankruptcy is recorded on a public register called the Register of Insolvencies.

If you wish to discuss using bankruptcy to recover debt further please contact one of our experienced debt recovery team, based in both Glasgow and Edinburgh.