Understanding the differences between bankruptcy in England and Wales, and in Scotland
By Mr Bankruptcy
17th March 2025
Bankruptcy is a complicated and stressful process to go through, but is it worse depending on which side of the border you live?
It’s reassuring to know that both legal systems aim to give people who are struggling with unmanageable debt a fresh start. But there are some important procedural differences, depending on whether you live in Kilmarnock or Kilburn, and understanding them may help you navigate the process more easily.
Bankruptcy in England and Wales
In England and Wales, bankruptcy is governed by the Insolvency Act and Insolvency Rules of 1986. The main points of the process are:
- Bankruptcy orders. This is something you can apply for yourself, but also by your creditors if you owe them at least £5,000.
- Exempt assets. Certain items can’t be sold off to pay your debts, for example essential household equipment and the tools you need to do your job.
- Debt relief orders. If you owe less than £50,000 but don’t have any significant assets, you may qualify for a DRO. This is a simpler and cheaper process than bankruptcy.
- Restrictions. If you become bankrupt, there are certain things which you are not allowed by law to do, which I cover in more detail in my blog, both for a company director or for personal bankruptcy.
- Discharges. Most bankruptcies in England and Wales last for one year, after which you are discharged from your debts and the restrictions are lifted.
Scottish bankruptcy regulations
North of the border, bankruptcy is known as a sequestration and is regulated by the Bankruptcy (Scotland) Act, 2016. Here are the key elements of sequestration:
- Sequestration orders. As in England, you can apply for a sequestration order yourself but you only need to owe your creditors £3,000 or more for them to be able to petition for one.
- Minimal asset process. If you owe less than £25,000 and have few significant assets, you may qualify for a MAP which, like a DRO, is a simpler and cheaper alternative.
- Protected trust deeds. This is a voluntary agreement between you and your creditors to repay a part of your debt over a four-year period. If you accomplish this the remaining debt is written off.
- Exempt assets. As in England, some important items are protected from being sold to pay off your debt.
- Discharge. Most sequestrations in Scotland last for a year but you may have to make contributions from your income to your creditors for up to four years.
The main differences and what they could mean to you
As you can see, the two processes are roughly in parallel and provide similar protections, options and outcomes. However, there are some variations that can make a difference to the individual.
The threshold for creditors to petition for your insolvency is lower in Scotland than in England, so you might find people taking action sooner if you owe money.
The debt relief alternatives to bankruptcy or sequestration are broadly parallel, though the terms for qualifying in England and Wales are broader. This means you may qualify in England for a DRO but not for MAP in Scotland.
Unlike England and Wales, Scotland offers a protected trust deed. However, in England Individual Voluntary Arrangements (or IVAs) serve a similar purpose albeit with different terms and conditions. And with a Scottish protected trust deed, you may be allowed to avoid full sequestration, which you can’t with an IVA.
The length of time during which you have to make financial contributions from your income also varies. In England this lasts for one year, whereas in Scotland it’s four. So, sequestration is more likely to have a significant impact on your disposable income for the foreseeable future and you should take this into account in your financial planning.
Seeking help
The two legal systems have many similarities, and both are trying to make a bad situation better for all sides, but there are also some key differences that you should be aware of if you’ve moved from one jurisdiction to another and aren’t familiar with how things are done there.
When I advise clients, I make sure to explain the options and processes in detail because this understanding helps them to make informed decisions better and we can navigate them more smoothly.
Wherever you’re based, though, and while it’s important not to delay taking action if you face unmanageable debt, it’s also critical to seek professional advice before you decide on your course of action.
It’s also important to remember that wherever you live and work, and no matter how bad your situation appears, bankruptcy may be your best chance to regain control of your finances and of your life.
James Rosa Associates
James Rosa associates is a firm of debt advisors and debt adjustors who rely on a friendly, supportive and non-judgemental approach to guide clients through a difficult time.
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Please be advised that all views expressed in these posts are those of the author and not of James Rosa Associates ltd.