Minimal Asset Process – A Detailed Guide

A Minimal Asset Process (MAP) is best described as an entry route to sequestration (bankruptcy). This arrangement is only available in Scotland where the laws are different from those in England, Wales, and Northern Ireland. The criteria are fairly strict and this type of arrangement is focused on a specific group of individuals.

What is Minimal Asset Process?

The best way to describe a MAP is a debt management solution focused on those with low income and minimal assets. Individuals eligible for a MAP will make a one-off £90 payment and after six months their debts are written off with no additional payments required. Those who qualify for a MAP are generally:

  • Non-homeowners
  • In receipt of benefits – for at least six months
  • OR have no surplus income

Minimal asset process is only available for debts of between £1500 and £17,000 where assets are no more than £2000 (excluding a vehicle). Any vehicle should not be worth more than £3000 and no single asset worth over £1000. Those who qualify, where their income situation does not change over the six-month period, will see their debts written off.

What is the eligibility for a minimal asset process?

Eligibility for MAP

As we touched on above, the criteria with regards to a MAP are relatively tight and focused on a specific group of individuals. For example, in order to apply you need to fulfil the following conditions:

  • A minimum debt of £1500
  • A maximum debt of £17,000
  • Total assets not exceeding £2000 (excluding a vehicle)
  • No asset worth over £1000 (excluding a vehicle)
  • Any vehicle cannot be worth more than £3000
  • In receipt of benefits for at least the last six months
  • OR assessed by an adviser to confirm no surplus income available
  • Own no property/land
  • Be in receipt of a certificate for sequestration
  • Resident in Scotland for at least 12 months
  • No bankruptcy action within the last five years
  • No MAP action within the last 10 years

The concept behind this form of debt management is to release the individual from financial liabilities they would never be able to repay. This then gives them the opportunity for a “fresh start” with limited access to such arrangements in the future should they again find themselves in financial difficulties.

What debts qualify?

There are certain types of debt which do not qualify for a MAP and may effectively exclude some individuals based on the strict criteria. The type of debts which are applicable for a MAP include:

  • Overdrafts
  • Bank loans
  • Payday loans
  • Utility bills
  • Credit cards
  • Catalogue accounts
  • Store cards

You will notice that mortgages do not appear on the qualifying list which ties in with the condition that homeowners cannot apply for a Minimal Asset Process. There are some debts which do not qualify such as:-

  • Student loans
  • Court fines
  • Child maintenance
  • Secured debts
  • Fraudulent debts

If you are unsure whether a particular type of debt is eligible for a MAP it would be sensible to approach an adviser to clarify the situation.

What are the benefits of minimal asset process?

Accountant debt

There are pros and cons with regards to any debt management service but those eligible for a MAP often find a quick resolution to their troubles. Some of the benefits to consider include:

  • Those who qualify for a MAP can apply at a time of their choosing rather than being forced into bankruptcy by their creditors
  • There is no requirement to appear in court
  • Once the MAP has been approved, interest/charges will stop accruing on debts
  • No direct negotiations with creditors
  • No need to deal with bailiffs/debt collectors
  • No final demands from creditors once the MAP has been approved

While there is obvious distress when individuals find themselves in financial difficulties, there is also the issue of mental health at stake. Removing the threat of bailiffs/debt collectors turning up at any moment can be a welcome relief to those struggling.

What are the potential risks?

There is obviously some downside to applying for a MAP even though the benefits far outweigh the potential risks for many. Entering into any debt management arrangement is not something which should be taken lightly. The potential downsides include:-

  • Credit ratings will be impacted for six years from the date on which a MAP is approved, which will limit access to any future credit
  • Historic bank accounts may be frozen/closed and it can be difficult finding a replacement
  • The individual’s name will be added to the public Register of Insolvencies
  • Some employers/landlords have strict rules regarding bankruptcy therefore a MAP could limit employment/rental opportunities
  • Sole traders may find difficulty obtaining standard/trade credit for their business

So, while a MAP may well be the right move for many individuals suffering financial distress, there are pros and cons to consider before going down this path.

Summary

In basic terms a MAP is a fast-track route to writing off debts for individuals who have limited assets, limited income and effectively no chance of paying off cumulative debts of between £1500 and £17,000. It offers the opportunity to draw a line under issues of years gone by and pursue a “fresh start” although there are pros and cons to consider as detailed above.

If you don’t live in Scotland, alternative solutions could be an IVA or a DMP.