Low income Low Assets (LILA)
Is the LILA right for you?
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Low Income Low Asset (LILA) is a route into sequestration (bankruptcy) for people in Scotland who have a low income and don’t own valuable assets like a home or other property.
In LILA you will pay what you can afford towards your debts for a set period of time. If you co-operate with the terms of the sequestration, you could be discharged from the remainder of your debts in as little as 12 months, although you may have to make contributions from your income for at least three years. Any contributions will be set at a level you can afford, and will take your bills and essential expenditure into account. And you don’t have to worry about raising any money from your assets because if you qualify for LILA, your assets shouldn’t be worth enough to be of interest to your creditors.
LILA can give you a clean slate and allow you to start again in a relatively short period of time. However it is sequestration, and therefore it can have long-term effects on your credit rating. Sequestration stays on your credit report for at least six years – longer if you don’t keep to the agreed terms – and will make it harder for you to get credit in the future. You must be honest about your income and expenditure. If you are required to make a contribution, you need to stick to your budget for the agreed length of time, and declare any increases in your income or any windfalls you may receive during this time. Also, your details will be placed in the public register of insolvencies until 12 months after discharge. However this is mainly used by creditors and credit reference agencies.
In order to apply for sequestration, you need to pay a fee of £200 to the Accountant in Bankruptcy, the government agency which administers bankruptcies in Scotland. There shouldn’t be any other fees for you to pay. Creditors can also apply to have you made bankrupted, in which case it is their responsibility to pay the fee.
Do I qualify for LILA?
To qualify for LILA you must
• Owe at least £1,500.
• Be unable to pay your debts.
• Be resident in Scotland, or have lived there in the last year.
• Have an income lower than the National Minimum Wage (currently £6.31/hour or £252.40/week for a 40 hour week).
If you are on Income Support, income-based Jobseekers’ Allowance or Working Tax Credits, you will be treated as though your income is less than the minimum wage.
You can’t qualify for LILA if you:
• Own a house, other property or land
• Have any single asset worth more than £1,000
• Have total assets worth more than £10,000.
If you would like advice about LILA and other debt solutions which may be appropriate for you.