FORMER Rangers owner Craig Whyte is facing bankruptcy and the loss of his Highland castle home after the Scottish Football Association launched legal proceedings to sue him over a £200,000 unpaid bill.

Hampden chiefs have reportedly been pursuing the Motherwell-born venture capitalist for the cash for 10 months, but last week lodged legal papers against him at Glasgow Sheriff Court.

The £200,000 bill relates to fines issued in April last year for bringing the game into disrepute during his nine-month tenure at Ibrox.

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Lawyers are understood to have delivered the writ last week to the businessman's Castle Grant home near Grantown-on-Spey, Moray. The proceedings give him a final chance to pay before full court action – which could see the property seized – begins.

However, a source close to Mr Whyte, 42, said he had no intention of settling the bill and was instead planning to sue the SFA for £40 million for loss of earnings and damage to his reputation.

The source said: "Never mind the SFA bankrupting him – he would love to bankrupt the SFA. He believes they failed to follow due process and the evidence they used was flawed."

Mr Whyte bought Rangers from Sir David Murray for £1 in May 2011. In February 2012, the club went into administration after racking up debts of £14m in unpaid tax and PAYE during the businessman's reign.

It subsequently emerged he had used £24m of season ticket money advanced by London-based firm Ticketus to fund the purchase of the club, which included paying off debts owed by Rangers to Lloyds.

The stand-off looks set to turn into an all-out war that will be thrashed out in the courts, with legal experts warning the case could drag on for years.

A legal source said: "This one could run and run. The SFA think they are due the money because when Whyte took over Rangers, he agreed to abide by SFA membership rules."

"Of course, Whyte could argue the £200,000 punishment was unreasonable and unjustified. He might also argue the fine doesn't lawfully apply to him. There is a suggestion he could use a loophole by saying he was the club's owner, and the SFA rules only applied to club 'officials'."

The SFA confirmed a writ had been served against Mr Whyte, but said there would be no further comment.