Sometimes, there really is no way to repay everything you owe. If you’ve looked into all your options with an expert and they agree there’s no realistic alternative, you may have to declare yourself bankrupt.

However, it’s not as simple as signing a form. There are conditions you’d have to meet if you’re a Scottish resident and want to declare yourself bankrupt.

• Your debts must add up to at least £1,500.
• You must be a Scottish resident – or have lived in the country sometime in the last year.
• It must be at least five years since you were last declared bankrupt (if you’ve actually entered bankruptcy before).
• You must pay a £200 application fee.

On top of those conditions, you’d also have to prove that you are apparently insolvent – or get one of your lenders to agree to you declaring yourself bankrupt. Here’s an explanation of what that means:

• Apparently insolvent. This means you can show that you can’t repay your debts as they become due. To prove this, you’d need one of your creditors to have gone to court to obtain a court ruling that you owe them money.

• Creditor concurrence. This means that one of your creditors is willing to sign a form to confirm that they agree to you making yourself bankrupt.

Since April 2008, there’s also a third way – one that’s available to people who can’t prove they’re apparently insolvent and can’t get their creditors to agree to them entering bankruptcy. This is called the LILA (Low Income Low Asset) route into bankruptcy and is only available to people who meet the criteria you’ll find on this page about the LILA route into bankruptcy.

Applying for bankruptcy in Scotland

To apply for bankruptcy, you’ll need a debtor application form, which you can get from a money adviser or from the Accountant in Bankruptcy (AiB – Scotland’s Insolvency Service) or from www.aib.gov.uk. The AiB will act as your trustee unless you wish to name an insolvency practitioner to do this for you (in which case, they’ll need to consent to this in writing).

You’ll need to complete your application form and send it to the AiB, along with your payment and evidence that you’re actually eligible to apply for your own bankruptcy.

As long as you’ve filled in the form correctly and provided all the information that’s required, your bankruptcy should be awarded within just five working days of the day the Accountant in Bankruptcy receives it. If there’s some information or evidence missing, it’ll probably take longer since the AiB will have to get in touch to tell you what’s missing.

Consequences of bankruptcy in Scotland

Entering insolvency will have a serious impact on your credit rating for six years. You’ll also have to tell your bank that you’ve been made bankrupt and they may close or freeze your account. Any savings you have will be transferred to your trustee, who may also sell off other assets you own so you can repay some of the money you owe.