LILA eligibility

Find out whether you are eligible for the LILA route to bankruptcy

The main criteria are:

  • Only available to Scottish residents
  • Must have a low income and few valuable assets
  • Must be unable to afford your debts

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Call 0800 970 7673

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LILA: Debt help for low incomes

If you have a substantial amount of unsecured debt you simply can't afford to repay, entering bankruptcy could be the most suitable solution to the problem. Going bankrupt, though often considered a 'last resort', could give you peace of mind that you're dealing with your debt problems, along with stopping demands from your lenders.

However, Scottish residents can't normally enter bankruptcy unless at least one of their unsecured lenders agrees, or they can prove that they are 'apparently insolvent' - which means a lender must have gone to court to prove they're owed money by the borrower.

People in Scotland with low incomes who need to enter bankruptcy may have an alternative option: the LILA route into bankruptcy. LILA stands for 'Low Income, Low Asset', and it's an approach designed to help seriously struggling borrowers who have low incomes and few assets to go towards repaying their debts.

So what exactly does the LILA route involve, and how could it help struggling Scottish residents on low incomes enter bankruptcy?

What is the LILA route into bankruptcy?

The LILA - Low Income, Low Asset - route into bankruptcy is available exclusively to residents of Scotland.

If you have significant unsecured debts you have no way of repaying in the foreseeable future, and you're on a low income with relatively few valuable possessions, the LILA route could provide a realistic way of entering bankruptcy.

If you're in this situation, an adviser could help you decide if the LILA route is right for you. The application works the same as a normal bankruptcy: you'll pay a £200 application fee, as well as court fees, and if it's agreed you'll be declared bankrupt.

Why would I want to choose the LILA route into bankruptcy?

In Scotland, you can only enter bankruptcy in the 'usual' way if one or more of your lenders agrees to it, or has gone to court to prove that you're 'apparently insolvent'.

If this isn't an option for you, the LILA route into bankruptcy could be a suitable alternative that helps you access the benefits of bankruptcy: protection from your lenders, a date you'll be free of your unsecured debts (after you've been discharged - usually after 12 months), and the opportunity of a new start with your finances.

Am I eligible for the LILA route into bankruptcy?

The LILA route into bankruptcy isn't open to all borrowers who are looking for an alternative route into bankruptcy.

You must currently be resident in Scotland - or have lived there in the last year - to be eligible.

Additionally, to qualify for the LILA bankruptcy route you must also meet the following criteria:

  • You mustn't have a weekly salary that exceeds the standard national minimum wage for a forty-hour working week: currently £237.20.
  • You mustn't have any personal assets worth more than £1,000 individually (except a car, which can be worth £3,000), or £10,000 when combined.

However, if you receive income support, working tax credits or income-based jobseekers' allowance, you'll still meet the 'low income test', even if you're actually earning more than £237.20 per week.

If you have any questions about whether or not you qualify for the LILA route into bankruptcy, why not call 0800 970 7673 for a professional opinion?

What happens once I've entered the LILA route into bankruptcy?

Once you've gone down the LILA route, you'll enter bankruptcy in the normal way, and all the standard conditions and restrictions of bankruptcy will apply.

You'll be expected to repay whatever you can afford with your assets, salary or any other contributions (after your essential living costs have been covered), be protected from any further action from your unsecured lenders and will have any outstanding unsecured debts you can't afford to repay written off (normally after a year).

You will usually be discharged from bankruptcy after a year (though you may have to make repayments for up to three years afterwards if you can afford to) and although it could be the most suitable approach for some borrowers, it'll have a serious impact on their credit rating, which will be affected for six years.

Call 0800 970 7673 to talk to an expert adviser who can tell you more about how bankruptcy works.

What are the disadvantages to the LILA route into bankruptcy?

Like all debt solutions, there are some disadvantages to the LILA route into bankruptcy to consider. Like any 'normal' bankruptcy, you:

  • May have any valuable assets, including your home if you're a homeowner, sold to go towards your unsecured debts
  • Won't be able to work in some professions, e.g. as a company director
  • Will have to attend court
  • Will affect your credit rating for six years, which can make it difficult to borrow money during that time.
  • Can only apply for up to £500 of credit and would need your trustee's permission.
  • Your bankruptcy will be entered on a public register, which is advertised.

Is the LILA route into bankruptcy right for me?

Bankruptcy is often considered a 'last resort' for people with serious debt problems. But for struggling borrowers with low incomes and few assets, the LILA route into bankruptcy could be the most suitable way of dealing with the problem.

The information given here is a guide and no substitute for the one-to-one advice you would receive from a debt expert, so call 0800 970 7673 to find out more. Even if the LILA route into bankruptcy isn't appropriate for you, they could help you find an approach that is.