Insolvency involves a situation, in which a person or an organization is not capable of repaying any of their debts. During such cases, an insolvency trustee is allotted to sell all available and liquid assets, and whatever recovered from the sale is paid to off as liabilities to the creditors. In Scotland, the insolvency of limited companies and limited liability partnerships and other organizational insolvencies are largely chaired by the UK parliament, where as personal insolvencies, including insolvencies of some public bodies like schools are chaired bythe Scottish Parliament and the court.
There are three forms of insolvencies in Scotland; sequestration, the protected trust deed and corporate insolvency. The key act that reins oninsolvency in Scotland is the Bankruptcy (Scotland) Act 1985.
Sequestration, usually means Bankruptcy, involves the transfer ofassets, belonging to the debtor, to a trustee. The debt owed to the creditors must be equal to or more than £1500. If Sequestrated, the debtor is under various, court orderedrestrictions, including the fact that he or she can not ask or loan any more credit.
Protected trust deed is, a mutual, final resolution contract or a trust deed in which the debtor settles his debt with the creditors as much as the debtor can afford. Usually a trustee is involved and the proceedings usually end in the debt being written off, if the creditors do agree, in all other sense the deed does not stop the creditor from taking legal action against the debtor. Under such an adjustment the debtor, usually is not subjected to many restrictions and the trust deed usually lasts for the period of three years. This arrangement usually never leads to sequestration, which in Scotland, can last a lot longer and ma have tighter restrictions than a period of three years, with limited restrictions
