Bankruptcy in Scotland is a process known a Sequestration. It is a formal insolvency procedure in which your estate is used to deal with your creditors in a process administered by a Trustee. They will take control of your assets and deal directly with your creditors on your behalf. In Scotland Sequestration is often used as an alternative to a Protected Trust Deed, and like with a Trust Deed affordable payments are made each month for a period of up to four years. It may be chosen as a solution if there is not enough disposable income to make the repayments required by a Trust Deed.
Throughout the process the Trustee maintains control of your assets and repayments, and has the responsibility to investigate whether any of your assets – including your property – should be sold to raise funds to be repaid to creditors. With our experience and understanding of dealing with individuals dealing with financial difficulties we know how serious such a situation would be, and our advisers would be unlikely to recommend Sequestration if it is thought that your home will be at risk. If such a situation is unavoidable we will always ensure that you are informed well in advance that there is a possible risk to your home.
While we always work to ensure the security of your home, it may however be necessary to release other assets – such as equity on you home – in order to pay creditors. Depending on your own personal situation and the level of repayments you are able to make, the process can take up to four years to be completed. However, provided you adhere to the terms of the process and give your full co-operation, it may be possible to be discharged from the process at the end of the first year if the Accountant in Bankruptcy grants it.
In order to begin the process of Sequestration an application must be made to the Accountant in Bankruptcy, costing £200, with the agreement of a creditor or creditors who are owed more than £1500. If those conditions cannot be met it may be possible to be granted a Certificate of Insolvency from an approved Money Adviser or Insolvency Practitioner. From the time it is granted it remains valid for 30 days, allowing you to begin the process.
How to get started?
1. Contact us for advice
In order to get started, you should first contact an Insolvencey Practitioner or an approved Money Adviser. You must be sure that you will fully understand the process and receive accurate and appropriate advice as you begin Sequestration. Our highly-trained team can quickly and accurately assess your situation and begin to build a picture of your finances, establishing a route to becoming debt free. If you have lived in Scotland for more than six months, have not been sequestrated in the past five years and are facing debts amounting to more than £1500 you will be able to submit an application for Sequestration. To begin this process you should contact our team, and one of our advisers will work with you to assess your income, expenditure and debts before providing you with all the options available to you.
2. Choose your debt solution
There is no obligation to proceed with Sequestration, but if you choose to apply for sequestration then an application will then be submitted to the Accountant in Bankruptcy by you Money Adviser or Insolvency Practitioner. This is an important part of the process, in which the Accountant in Bankruptcy sets the level of your contribution and appoints a Trustee to you. If you are awarded Sequestration then your Insolvency Practitioner becomes your Trustee. In order to be awarded your application must contain a Certificate of Sequestration or – if it has been granted – evidence of agreement by a creditor or creditors whose total debt amounts to over £1500. The £200 cost of the application must also be met at this stage.
3. Sequestration awarded
Once you have been awarded Sequestration, your Trustee will begin the process with a discussion about your own personal circumstances and if it is appropriate to use any of your assets to raise funds for creditors. At this stage your Trustee will also become the point of contact for any creditors, meaning you will no longer be contacted or pursued by them. The Trustee will contact them on your behalf in future. Our experience in this process means we are aware of the importance of protecting your home and family, and will always work with those interests in mind. We won’t push you into an agreement you are unhappy about, and will keep you informed through the whole process.
4. Discharge from Sequestration
One of the advantages of Sequestration is that with your full co-operation in the process it may as little as one year for you to be discharged. Although you may be released at this stage it does not mean that the Sequestration is completed, and your Trustee remains in office for the next three years. You must continue to co-operate with your Trustee throughout this time, and if there are still assets to be realised it is important that they do so. If a contribution from you is agreed as part of Sequestration then that will continue to be paid as set out at the start of the process.
However, at Scottish Debt Adviser we will always be open and clear with you, and outline any disadvantages as well as detailing the positives of each option.
- Once it begins you are safe from any legal action from your creditors, and you no longer have to go through the stress of dealing with creditors directly.
- The Trustee will act for you in any contact or correspondence throughout the whole term of the process. If you are receiving benefits these will not be considered as ‘income’ during Sequestration or for the purposes of calculating you monthly contribution, if required.
- You will only need to pay the agreed affordable monthly payments.
- After the completion of the monthly payments you should be financially solvent again.
- With Sequestration your credit rating may be affected, as will your future ability to get credit.
- If you own your own home it may be necessary to realise any equity on your property, however your Trustee will always aim to do so without selling your home.
- Any other assets of value may also be used to realise funds for the process. If it is not appropriate for your own situation to go through this process it may be better to investigate Protected Trust Deed instead, provided it reasonable for you to do so, and we will suggest that to you. The final decision will always be yours, and our advisers will never push you into a solution you are unhappy with.
- If you proceed with Sequestration your case will also be displayed online with all other live case as part of the Register of Insolvencies. Cases which have been discharged in previous years will also continue to be displayed for that period of time.
- If you have a student loan it may not be included in the process if it is covered by the Education (Scotland) Act 1980. In this situation you would still be liable to repay the debt, but our adviser will be clear with you in addressing this situation.
- If you hold a personal or joint account you will need to contact your bank. Some banks will not allow an individual to hold an account with them if they enter Sequestration. Even if you already hold an account and do not owe your bank any money you may find that your bank insists on your account closing. If you have a joint account they may require you to close the account and for both parties to open individual accounts of their own. Some banks offer a simple bank account, and your Trustee will be able to advise you on how to access this service.
Our vast experience in successfully tackling debt problems through the process of Sequestration means that we are able to tailor such a solution to your own circumstances, and advise you accurately and with authority throughout the process. You may have concerns about how Sequestration will affect your life once it begins, and we will take you through the process step by step.
You may have worries about student loans or personal bank accounts, and how they will be affected by Sequestration, but we will make sure any questions you have are answered fully. Sequestration is a formal procedure, and once it begins you must be prepared to fully complete the agreement. To get free and confidential advice about Sequestration contact us either by telephone or apply online, and we will arrange a discussion with you.