Bankruptcy, or sequestration, as it is known in Scotland, can be a costly ordeal – and not just for your creditors. There’s a £200 upfront fee, followed by 4 years of earning’s contributions.
For some, that is a worthwhile trade-off for relative financial stability.
But what about those who couldn’t afford to face such costs, even after their debt has been written off? That’s where the Minimal Asset Process comes in.
The Minimal Asset Process (MAP) is a method of applying for bankruptcy, known as sequestration in Scotland, for people on a low income with few or no assets. It allows you to write off debt that you would otherwise struggle to repay within a reasonable timeframe.
The Minimal Asset Process is exclusive to Scotland and replaced the Low income, Low Asset (LILA) scheme in 2015.
If you live in England, Wales or Northern Ireland, a Debt Relief Order (DRO) may be considered the closest alternative solution, though the benefits, risks and fees associated with it are different.
What kind of debts are covered by the Minimal Asset Process?
Most debts can be included in a MAP bankruptcy. This includes overdraft charges, credit cards, payday loans, utility bills, bank loans, and catalogues and store cards.
Some debts, such as student loans, child maintenance arrears and court fines are not included in the MAP bankruptcy.
Can I apply for the Minimal Asset Process?
To be eligible for the Minimal Asset Process, the following criteria must be met:
You must live in Scotland, or have lived in Scotland in the last 12 months.
Your debts are between £1,500 and £17,000.
If you own a car, it must be worth £3,000 or less.
Your other assets are worth less than £2,000 in total; no single item should be worth more than £1,000.
You don’t own your own home or any land.
You must not have been through sequestration in the last five years.
Your income must also one of the following income-related criteria:
Your income consists solely of income-related benefits such as jobseekers allowance (JSA). This must have been the case for at least six months.
You have no disposable income (that is, you have no money left to pay debts once all of your essential living costs are paid).
An approved money adviser will be able to tell you if you are eligible and if this is the solution for you. All approved money advice services in Scotland use the same Common Financial Tool to decide on eligibility and ensure that the correct insolvency product is offered.
How do I apply for the Minimal Asset Process?
You will first need to seek the advice of a licensed insolvency practitioner or debt solution company, such as Scottish Debt Expert, who will review all of your debts, your income and assets. You will be made aware of the repercussions of formal insolvency, including the impact it will have on your credit rating and applying for credit in the future.
If it is decided that the Minimal Asset Process is the most appropriate course of action, you will be charged a £90 fee, payable to the Accountant in Bankruptcy (AiB) before the application can proceed. There are no exemptions or reductions available.
You will be given assistance in completing the Minimal Asset Process application form.
If you are approved for a Minimal Asset Process Bankruptcy, creditors will be unable to take any further legal action against you.
How long does Minimal Asset Process bankruptcy last?
You will usually be discharged from a Minimal Asset Process bankruptcy 6 months after the date it was awarded. However, you will continue to face restrictions so no borrowing for at least a further 6 months.
You will not be able to borrow more than £2,000, either solely or jointly, without informing the lender that you are bankrupt, for example. Failure to comply with these restrictions is an offence and could lead to a fine or in severe cases, imprisonment.
Will the Minimal Asset Process affect my credit rating?
The Minimal Asset Process will appear on your credit file for six years, and will make it significantly harder for you to obtain credit during this time.
Your name will also be added to a public register called the Register of Insolvencies (ROI). It will remain on this register for 5 years.
What else does a Minimal Asset ProcessSequestration affect?
As well as damaging your credit rating, the Minimal Asset Process can have the following impacts:
The bank may close or freeze your bank account, and you may find it difficult to open another one.
You may lose your job. Some contracts of employment stipulate that you must remain solvent. Your employer may decide to take disciplinary action, or even dismiss you. You should speak to your HR department for clarification if you are unsure.
You may be evicted by your landlord, especially if you have rent arrears, as these are included in the MAP bankruptcy. You may find it difficult to obtain future tenancy agreements.
If you are self-employed, you may find it difficult to continue trading with reduced access to credit.
Is Minimal Asset Process Bankruptcy suitable for me?
Sometimes, a fresh start is necessary.
With reduced timescales and a low application fees, the Minimal Asset Process makes it even easier, particularly when compared to the old LILA process, for people on low incomes with few assets to get out of debt quickly and back on the right track.
Scottish Debt Expert are licensed debt advisers with over 25 years of experience in providing debt advice. If you need debt help, you would like to know if the Minimal Asset Process is for you, or you would like to know more about the other debt solutions we offer, including Trust Deeds and Debt Arrangement Schemes, get in touch now for a free initial consultation.
