What happens to my wages if I'm made bankrupt?

When a sequestration order is granted and you are made bankrupt in Scotland, a trustee will be appointed to take control of and then sell any assets that you own, including your home.



Your trustee may also want you to make a contribution from your income or pension to help towards paying for the cost of your bankruptcy and your debts.

If you receive social security benefits or tax credits no contribution will be taken from them.

Your trustee will look at your income and how much you and your family need to live on. They will then assess whether or not you have any surplus income and, if you do, they will expect you to make a contribution from that.

If you agree with the trustee's expectation and to making a voluntary contribution, an Income Payment Agreement (IPA) will be made. You can agree to have deductions taken directly from your wages.

If you cannot reach an agreement, your trustee can ask a sheriff to decide the amount you should pay. The sheriff will take into account any information you provide before making a decision.

The sheriff will make an Income Payment Order (IPO) stating the amount you must pay. Your trustee can ask the sheriff to order payments directly from your wages.

Every six months you will be required to complete a questionnaire to review your financial position even if your circumstances have not changed. Your trustee will then reassess the situation and may vary your contribution. If you have an IPO, you or your trustee will have to go back to court to let the sheriff decide whether your contribution should be varied.

An IPA and an IPO last for three years from the date they are set up.

If you stop making your contribution under an IPA, your trustee may apply to the sheriff for an IPO to be made.

It is a criminal offence to fail to comply with the terms of an IPO. If you stop making your contribution under your IPO, your trustee may report you to the sheriff.

It is therefore important to contact your trustee as soon as possible if you are unable to continue paying your contribution.