A-Z of Personal Insolvency

B – Bankruptcy (Sequestration)

Bankruptcy in Scotland is called sequestration. It’s a legal process for people who can’t pay their debts in full over a reasonable period of time.

A Trustee (normally an Insolvency Practitioner) will review your circumstances throughout the 48-month period and if you can afford to, you will make a contribution.  Debts are written off at the end.

It’s serious—it affects your credit record, job options, and ability to be a company director. But it also offers a fresh start when debt has become unmanageable.

💡 If you have little income and no assets, you might qualify for a quicker solution called Minimal Asset Process (MAP) Bankruptcy.

C – Credit File

Your credit file is a record of your borrowing history. Missed payments, defaults, insolvency, or bankruptcy all appear on it for up to six years.
This affects your ability to get credit, mortgages, or sometimes even certain jobs.
💡 While a damaged credit file can feel like a setback, rebuilding is possible with time, stability, and good financial habits.

D – Debt Arrangement Scheme (DAS)

DAS is Scotland’s official government-backed debt repayment plan. It lets you repay debts over time, in full, with all interest and charges frozen.

You make one affordable monthly payment, which is shared among your creditors. DAS protects your home, wages, and assets from enforcement while you pay.

It’s flexible too—you can change payments if your circumstances change.

💡 DAS is often best for people with a steady income who want to repay their debts without the risks of bankruptcy.

E – Earnings Arrestment

This is when money is taken straight from your wages and given to a creditor after a court order. You keep a minimum amount to live on, but even small deductions can hurt your budget.

The good news? Earnings arrestments can be stopped if you enter a formal debt solution like DAS, a Trust Deed, or bankruptcy.

💡 If you’ve received a “Charge for Payment” or an arrestment has started, get advice quickly - acting early can stop it.

F – Full and Final Settlements

This is when a creditor agrees to accept less than the full amount owed as a lump sum and writes off the rest.

It can work if you can raise money from family, friends, or redundancy. But creditors don’t have to accept, so you must negotiate carefully and always get agreements in writing.

💡 An adviser or Insolvency Practitioner can help with this process and make sure you’re legally protected.

G – Gratuitous Alienations

This means giving away or selling assets cheaply when you know you’re about to go insolvent.

For example, selling your house to a relative for far less than it’s worth. In these cases, a Trustee can challenge the deal and take the asset back to make things fair for creditors.

💡 If you’re in debt, always get advice before moving or selling assets.

H – Heritable Property

Heritable property means land or buildings, usually your home.

In bankruptcy or a Trust Deed, what happens to your home depends on whether there’s equity (value left after the mortgage is paid).

If there’s no equity, a third-party nominal payment is often accepted to relinquish the Trustee’s interest.  If there is equity, a reasonable offer would be required to relinquish the Trustee’s interest. The Trustee has a legal duty to look at this.

💡 Don’t assume you’ll automatically lose your home. Get advice early to explore your options.

I – Insolvency Practitioners (IPs)

An Insolvency Practitioner (IP) is a licensed professional who helps people deal with serious debt. In personal insolvency, they run solutions like the Debt Arrangement Scheme (DAS), Trust Deeds, and bankruptcy (sequestration).

Their role is to follow the law, treat both creditors and debtors fairly, and guide you through the right solution for your situation.

💡 A good IP won’t just apply the rules—they’ll listen, explain your options clearly, and help you move forward with confidence.

J – Joint Debts

A joint debt is when two or more people borrow money together—for example, a joint loan, overdraft, or utility bill.

If one person goes bankrupt or enters a Trust Deed, the other person is still responsible for the whole debt. Creditors can chase them for payment. This called joint and several liability.

💡 If you share debts with someone, get advice together. One person’s debt solution can affect the other.

K – Know Your Customer (KYC)

Banks, lenders, and Insolvency Practitioners must follow “Know Your Customer” rules to prevent fraud, money laundering, and terrorist financing.

This means you’ll need to provide proof of identity, address, and financial details.
💡 KYC checks aren’t personal—they’re a legal safeguard to keep the system fair and secure.

L – Liabilities

Liabilities are another word for the debts you owe—such as credit cards, loans, overdrafts, council tax, or utility arrears. In personal insolvency, all your unsecured liabilities are listed and dealt with through your chosen debt solution (DAS, Trust Deed, or bankruptcy).

Some liabilities, like student loans, court fines, or child maintenance, usually can’t be written off and must still be paid.

💡 Understanding your liabilities is the first step in choosing the right solution—because different options treat debts in different ways.

M – Minimal Asset Process (MAP)

MAP is a simpler form of bankruptcy for people with very little income or assets.

• It costs less (about £50) but You might not have to pay this if you get certain benefits
• It usually lasts 6 months
• You don’t have to make payments if you can’t afford them
• At the end, most debts are written off

💡 MAP is there for people in genuine hardship who need quick relief. If your circumstances improve during the 6-month period, your application may be transferred to full administration (48-months). 

N – New Bank Account

If you’re entering insolvency, your bank may freeze or close your current account. You’ll often need to open a new “basic” bank account to manage wages and bills.
These accounts don’t offer overdrafts, but they’re protected from being offset against your old debts with the same bank.
💡 Always set up a safe, separate account before starting an insolvency process.

O – Overdrafts and Unsecured Loans

Unsecured debts (like overdrafts, credit cards, or personal loans) are included in most debt solutions.

When you enter a DAS, Trust Deed, or bankruptcy, these debts stop growing with interest and are handled as part of the plan.

💡 If you rely on an overdraft, be careful—banks can close accounts suddenly. Open a basic account elsewhere if you’re starting a debt solution.

P – Petitions

A petition is a formal request to the court to make someone bankrupt (sequestration).

A creditor may petition for bankruptcy after several unsuccessful attempts have been made to recover their debt.  They must be able to demonstrate that:

• Their debt is £5,000 or more
• They have attempted to collect the debt (e.g. enforcement action)

💡 Once the court awards sequestration, a Trustee takes control of your finances. Getting advice early may give you other options before it reaches this stage.

Q – Questions Matter

When you’re in debt, the worst thing you can do is stay silent. Asking questions early can make a huge difference.

Advisers and Insolvency Practitioners are here to explain your rights and options in plain English. Many fears, like losing your home or having wages arrested, can often be eased once you know the facts.

There are no silly questions. Every question brings you closer to an answer—and every answer helps you take back control.

💡 Debt is tough, but silence makes it tougher. Questions really do matter.

R – Recall of Sequestration

If you’ve been made bankrupt, sometimes it can be undone—this is called a recall.

It usually happens if:

• You’ve now paid the debt in full
• The bankruptcy was made in error
• Another proper solution was available

💡 Recall is possible, but not always. If you think your bankruptcy shouldn’t have happened, get legal advice quickly.

S – Statutory Moratorium

This is a legal “pause button” on debt action. For 6 months, creditors can’t arrest wages or take you to court.

It gives you breathing space to get advice and decide on a proper solution.

💡 You can only use it once a year—so use the time wisely.

T - Trust Deeds

A Protected Trust Deed (PTD) is a formal agreement in Scotland where you make affordable monthly payments for 4 years. At the end, any remaining unsecured debt is written off.

Once protected:

• Creditors can’t take legal action
• Interest and charges stop
• You focus only on your agreed payment

💡 It’s not right for everyone, but for many it’s a structured way to get back on track.

U – Unfair Preferences

If you repay one creditor in full while ignoring others just before insolvency, that’s called an unfair preference.

The law says all creditors should be treated equally. A Trustee can reverse those payments to make things fair.

💡 Don’t pay some creditors over others—get advice first.

V – Voluntary Bankruptcy (Debtor Application)

Bankruptcy in Scotland doesn’t always start with creditors—it can also be voluntary, through a debtor application. This means you choose to apply for your own sequestration when debts have become unmanageable.

There are two main routes:

• Minimal Asset Process (MAP): for people with debts between £1,500 and £25,000, with little income or assets.
• Full administration bankruptcy: for debts of £3,000 or more, where MAP isn’t available.

💡 Applying voluntarily can give you control over the timing and process, rather than waiting for creditors to force it through the courts.

W – Wage Arrestment’s

A wage arrestment is when money is taken straight from your wages and sent to a creditor. It can be stressful, but it’s legal once a court order is in place.

💡 Debt solutions like DAS, Trust Deeds, or bankruptcy can lift an arrestment and give you control again.

X – eXtra Income

If you’re in a debt solution like a Trust Deed, bankruptcy, or DAS, any extra income—such as overtime, a pay rise, bonuses, or a new job—may need to be reported to your Trustee or money adviser.

Your payments can then be reviewed and adjusted, so creditors get a fair return based on what you can afford.

💡 Always be open about changes in income. Hiding it can cause your debt solution to fail, but being upfront keeps you on track for a fresh start.

Y – Your Obligations in Insolvency

When you enter a debt solution, you take on responsibilities:
• Being honest about your income, debts, and assets
• Keeping up agreed payments
• Telling your Trustee or Money Adviser if your circumstances change
Failing to meet obligations can cause your solution to fail.
💡 Meeting your duties means your debts will be managed as the law allows—this may include making regular contributions if you can afford them, and partial write off or repaying in full under a DAS without added interest. At the end, you’ll have the chance of a genuine fresh start.

Z – Zero Interest in a DAS or Trust Deed

In the Debt Arrangement Scheme (DAS), all interest, fees, and charges on your debts are frozen. You repay what you owe in full over time, without the balance increasing.
In a Protected Trust Deed, interest and charges also stop once the Trust Deed becomes protected. You make affordable monthly payments for a set period, and any unpaid unsecured debts are written off at the end.
💡 Both options stop debts from spiralling, giving you a clear path to deal with what you owe.