You may be living in Scotland and find yourself struggling to your pay day-to-day bills or to keep up with loan repayments and other financial commitments, there are a number of options open to you to help clear your debts.
One of the debt solutions available for Scotland residents is the Minimal Assets process. Introduced on the 1st of April in the year 2015, M.A.P came to replace a similar debt solution, known as LILA (low-income low asset) which was a form of bankruptcy, or sequestration as it is known in Scotland. Please note that The LILA is no longer a viable route into bankruptcy.
MAP bankruptcy is only available if you live in Scotland. A debt relief order (DRO) is a similar solution available in England, Wales or Northern Ireland, but has different benefits, risks, and fees associated with it.
MAPs which actually have their full known as Bankruptcy-Minimal Asset Process should be considerably cheaper than declaring a full-scale Bankruptcy. People are usually discharged after just a mere six months which is way less, compared to the six or five years a full bankruptcy may last. It’s also an option for the low-incomers who have very negligible assets or income.
Its main advantage is that it may provide an opportunity for someone to start off their life afresh, with no debts at all. Most unsecured debts can be included except; student loans, court fines, maintenance due under a court order, debts incurred through fraud (including benefit over-payments). Other executions can apply.
- 1 How does it work?
- 2 Are you qualified for Minimal Assets Process (MAP)
- 3 Risks associated with MAPs
- 4 Revocation of Tenancy agreement
- 5 Sequestration or Minimal Asset Process?
- 6 Things to consider while going through the MAP process
How does it work?
After lodging a successful application of MAP, you will then have your roadmap for sequestration. This though should only be looked into and confirmed by an approved debt advisor, who will weigh in on all your options and select the most viable for you. You will then need to fill in the Debtor Application pact, which should line you up for a MAP.
An assessment will follow, where all your debts, monthly income, or you’re in receivership of any government benefits. If I check out, that you have none or little income, you will have to stop your monthly contribution to your debtors. After six months from your MAP are awarded, and providing you have adhered to your obligations and the requirements, you would be discharged from MAP – and all the debt included in your MAP would be written off.
Are you qualified for Minimal Assets Process (MAP)
- To qualify for MAP, you must owe between £1,500 and £17,000. Only unsecured debts can be included in the plan so if you have got hire purchase debts, they wouldn’t count
- It might go without saying but as it’s a Scottish debt solution, you have to live in Scotland to qualify for MAP.
- Your assets can’t be worth more than £2,000 in total. In case you’re not sure what your assets are, it just means your belongings, including any savings or shares
- You can’t own a single item worth more than £1,000. Don’t worry – your car isn’t included in this limit. You can also own one car but this cannot be worth more than £3,000. If your car is worth more than this and you want to enter MAP, you might have to sell it and buy a cheaper vehicle.
- You also can’t be a homeowner to qualify for MAP. This is because a home is too big of an asset and MAP is really only for those who don’t have very many assets at all.
- The main condition you will need to meet for MAP is having a low income. This either means you have nothing left after you’ve paid all of your essential bills each month, or it means the only income you have is from income-related benefits like Jobseeker’s Allowance (JSA). A debt advisor can help you work out whether this applies to you.
- You can’t have been through sequestration or bankruptcy in the last five years or through MAP in the last 10 years.
- You must also be in receipt of benefits for at least the past 6 months, or have no surplus income after all your essential living expenses have been taken care of.
- The debtor must not own any land
How does one apply for a M.A.P?
- You need to first do some research and really confirm that the MAP bankruptcy is the best viable option for you
- If MAP is the best way to deal with your debts, you will need to ask for services for debt charities organizers or organizations that deal mainly with debt. This is for guidance and support hat you may require during the process.
- You will then lodge your application to the Accountant in Bankruptcy (AiB) who is responsible for overseeing all bankruptcies in Scotland. To apply, you’ll need to pay them a £90 fee. You should also confirm if the Debt Company may charge extra costs for their service.
What are some of the Advantages of M.A. Ps over sequestration?
- The advantage of MAP is that it normally lasts for 6 months, and you will not have to make any payments in unless your situation changed in the 6 months prior to discharge
Legal action is stopped
Immediately you have applied and successfully been granted into the Minimal Assets Process, any legal court action that may have been in court is stopped. This especially if you’re having issues managing your unsecured
Short duration of time
In majority of the cases, MAP should not last more than six months. But there is no change or alteration of the agreement, if your circumstances changes, and say you get a good paying job, then you are required to communicate this effectively to your debt advisor.
Any credit, or forms of unsecured loan, will be wiped off upon your completion of the agreement. Basically once your sign off, you should be debt free in less than six months.
Low-cost associated with it
MAP usually cost around £90 which can be paid in installments. This pocket-friendly cost is less as compared to the full-scale bankruptcy which usually cost around £200.
Frozen interest and charges
Immediately you sign up for a MAP, any interests add up or related charges on your debts, are frozen. Your creditors aren’t permitted to add any further cost concerning your debts.
Easy to set up
Generally, MAP is one of the simplest debt solutions currently there, in terms of applications. The major steps may include discussing with a debt advisor and then signing up the forms.
Risks associated with MAPs
- Restrictive Debt limit criteria
Whilst the MAP may be one of the easiest forms of debts solutions, its also very strict on who may enter or not. One of the keys looked up in keen, is your debt limit, which should not be less than £15000 – £17000, as well as to have little or none assets at all. Your income should also be way less.
- Register of Insolvencies
As this is a form of bankruptcy, it will be recorded on the public Register of Insolvencies, for a maximum duration of five years. This may be detrimental especially on your future loan’s applications.
- Credit rating
While MAP may last for less than six months, your credit ratings will still publicly show this, for a period of six years. This may hinder you from getting any forms of loans i.e. mortgages
MAP may affect your future Job prospects or career promotions. Most companies nowadays conduct their own credit check on their employees, especially if your specialization is on the financial Industry. You will also be required by law, to step aside or not hold office of the Managing Director, in any company, regardless if it’s private or public.
- Assets sold
Though a lot of people applying may lack any considerable assets, the little valuables in their possession may have to be sold to cover some payments of their debts. This may be heartbreaking to an individual
Revocation of Tenancy agreement
Some private landlords may evict tenants or not renew a tenancy agreement if you become bankrupt.
Hard to trade
If you’re self-employed, bankruptcy could make it harder to trade and obtain credit for goods and services
What debts can be included in a MAP?
MAP will deal with all of your unsecured debts, including:
- Bank loans
- Payday loans
- Credit cards and/or store cards
Secured debts such as mortgages and hire purchases are not included along with student loans, Court fines and any debt incurred through fraud.
What happens if my situation changes so that I no longer meet the MAP criteria?
If you no longer meet the MAP criteria within the initial 6-month period, for reasons such as;
- You actually have debts over £17,000,
- You actually have assets over the MAP limits or
- A change in circumstances which mean you have an income from which you can pay a contribution to your creditors,
Your bankruptcy will be then transferred to full administration Sequestration and you will no longer be automatically discharged after 6 months.
If this was to happen, you would be required to pay an additional fee of £110 as you will have entered into full Sequestration.
How will MAP affect my credit bank account or my job?
It may affect you in other ways depending on your individual circumstances, for example:
- Your bank is likely to close your account, and you may find it difficult to open a replacement
- Bankruptcy can lead to disciplinary action or dismissal in some jobs
- If you live in private rented housing or you have rent arrears, your landlord may evict you or decide against renewing you tenancy agreement
- If you’re self-employed, bankruptcy may make it harder to trade, especially if you rely on credit to pay for stock or services
Sequestration or Minimal Asset Process?
- If everything works out, and you have really qualified for a MAP, then most people would just try and want to go that extra mile, or even ask why not go through the full sequestration process and be declared bankrupt. After all, Bankruptcy covers most debt and will definitely have more or the same impacts.
- This though is not the case, as, for a start, A MAP is much cheaper as compared to any other form of bankruptcy. The total cost of bankruptcy in Scotland is usually around 200Euros while a MAP will just be less than half the cost at £90. This majorly is one of the most attractive aspect of MAP, as even the most cash strapped individual would readily afford it.
- MAP also has a lower threshold than sequestration as you must owe at least £3,000 to go bankrupt in Scotland. So, if you owe more than £1,500 but less than £3,000, MAP is more suitable than sequestration.
- It lasts for a shorter time than sequestration too – MAP usually ends after six months but sequestration usually last for 12 months.
Things to consider while going through the MAP process
Remain within eligibility criteria
Only as long as you continue to meet the requirements you will be discharged from the BAS with nothing more to pay. However, if newly identified assets are identified with 5 years of the award the trustee can be Reappointed. The MAP can be converted to full bankruptcy and funds used to make distributions to creditors.
Bankruptcy Restriction Order
If it comes to light you have deliberately concealed information which meant that you were wrongly awarded bankruptcy through the MAP you may be subject to a Ba Potential full bankruptcy
If you were made bankrupt through this route and the AiB discovers you did not meet the conditions, then your case will be transferred to full bankruptcy and possibly be required to make a monthly payment towards your debts.
Final points Although MAP could really help if you qualify, you must remember that bankruptcy will have a significant impact on your credit rating. A record of it will be kept on the Register of Insolvencies and on your credit file for six years after your bankruptcy order is issued which could make borrowing money very difficult.