An alternative way to go bankrupt for Scottish residents

If you are a low income earner and you don’t have many valuable assets, and you have serious debt problems, the LILA scheme is designed to help you to go bankrupt.

The LILA scheme is only available for residents of Scotland. LILA stands for Low Income Low Assets because it is a route into bankruptcy for people who earn below the national minimum wage for a 40-hour working week (currently £237.20) and have assets worth less than £10,000 in total.

Once the bankruptcy order is made, the process is the same as a standard bankruptcy.

In Scotland, you can only go bankrupt by normal means if your lenders have started taking legal action to recover your debts. You can apply for bankruptcy through the LILA scheme even if they haven’t.

What are the benefits of the LILA scheme?

If you have spoken to a debt adviser and they recommended bankruptcy, it could help you in the following ways:

• You can write off the part of your unsecured debt that you can no longer afford.
• You are protected from legal action from your lenders.
• You won’t deal with your lenders directly anymore.
• It could be over in 12 months (the usual time it takes to become discharged from bankruptcy).

What are the disadvantages of the LILA scheme?

• You cannot apply for the Low Income Low Asset route to bankruptcy if you’re a homeowner or your asset value or income is above a certain threshold. You can learn more about the income and asset threshold for the LILA scheme here.
• Your credit rating would be greatly impacted by bankruptcy, making it very difficult to borrow money for at least six years.