Sequestration
What is sequestration?
Sequestration is the Scottish legal term for personal bankruptcy. It is one way of dealing with debts you cannot pay. The sequestration proceedings:
free you from overwhelming debts so you can make a fresh start, subject to some restrictions
make sure your assets are shared out fairly among your creditors.
England & Wales: see Bankruptcy
Is sequestration right for me?
Anyone can be sequestrated. If you cannot meet your debt obligations when they fall due then you should consider sequestration / bankruptcy. You can apply to the AiB for your own bankruptcy provided you meet conditions below.
Your total debt is over £1,500, and
You must be either living in or have lived in Scotland during the last year, and
You haven't been made bankrupt within the last 5 years, and
You must pay the sequestration fees, and
Satisfy one of the following requirements
A creditor has agreed to making you bankrupt, or
You are an apparent insolvent. This means that you are unable to meet payments as they fall due. Your creditor will have taken some form of legal action in the Sheriff Court against you typically obtaining a Charge for Payment Order, Statutory Demand or Earnings Arrestment.
There may be alternatives to sequestration however for any debt solution to succeed you need to be in control of your finances. Use our free SOA to see where all your money is going and how control can be regained in your spending.
Sequestration - Pros v Cons
Pros
Sequestration will remove the pressure you are suffering from creditors
All your debts will be written off.
Cons
You will lose control of your assets which may entail your house , car and any household effect (if they are deemed to be of excessive value) being sold.
Your sequestration will be reported in the local press and in the Edinburgh Gazette.
While you are sequestrated it will be unlawful for you to incur credit of more than £250 unless you tell the lender that you are an undischarged bankrupt.
There are some occupations which carry restrictions about being sequestrated. Check you terms and conditions
Your are prohibited from acting as a director of a company.
You need the permission of the court to take any part in the promotion, formation or management of a limited company.
You are required to inform all persons concerned in the sequestration if you are about to trade in any business under any other name.
You cannot included a Student Loan,
If sequestration is granted you cannot become:
a Member of Parliament.
or act as a Justice of the Peace (JP) or Governor of a School.
a member of the Local Authority.
Who regulates sequestration?
The Accountant in Bankruptcy (AiB) is in charge is of handling personal bankruptcy in Scotland. They also act as trustee in all sequestrations except those in which a private-sector insolvency practitioner is appointed.
Alternatives to sequestration
Sequestration is considered as the last resort. Other alternatives which should be considered before sequestration are
Trust Deeds
Debt Management or Debt Arrangement Scheme (DAS)
How to apply for sequestration?
A petition for sequestration must be made to the AiB. It is usually presented either:
by yourself (debtor's petition); or
by one or more creditors who are owed at least £1500 by you and that amount is unsecured (creditor's petition).
A sequestration can still be made even if you refuse to acknowledge the proceedings or refuse to agree to them. If you dispute the creditor's claim, you should try and reach a settlement before the sequestration petition is due to be heard.
How long does it take to set up sequestration?
It usually takes 2-3 months to set up.
What happens to my credit rating?
You will be discharged from a sequestration after 1 year; however a note regarding your sequestration will remain on your credit file for 6 years.
Sequestration Fees - Who and how much?
Who?
Either the AiB or an insolvency practitioner will work on your case.
How much?
Your bankruptcy will cost £100 for administration plus court fees. Unfortunately there are no exemptions or waivers from the admin fee, but you may be entitled to legal aid for the court fees.
Take control of your debt
Complete our SOA and get your finances back in control. Once you complete your SOA you'll find that you understand where the solution lies to your financial problems.
And remember - our debt forum is here to offer you help and advice whenever you need it.
Don't let your debts drive you down the highway of despair - take back the controls and get on the road to financial happiness.