DEBT SOLUTIONS

Sequestration Scotland – Scottish Bankruptcy

DEBT SOLUTIONS

Sequestration Scotland – Scottish Bankruptcy

What is Sequestration

Sequestration is a form of bankruptcy in Scotland. It is a formal insolvency process in which a Trustee takes control of your estate to deal with the people you owe money to in your behalf.

Sequestration is often an alternative to a Trust Deed as in both cases you can make affordable monthly payments for a period of four years. You could find yourself considering a Trust Deed because you don’t have enough disposable income to be considered eligible for a Trust Deed.

An application for Sequestration costs £200 and can be submitted to the Accountant in Bankruptcy on the following basis:

  • With the agreement of a creditor or creditors who are owed £1,500 or more.
  • If this is not possible you can obtain a Certificate of Insolvency from an Insolvency Practitioner or approved Money Advisor. The certificate is valid for thirty days from the date it is granted.

In Sequestration the Trustee is granted responsibility to investigate whether assets, including any property, should be sold to raise funds for creditors.

In practice, Carrington Dean would be unlikely to recommend sequestration if your property was at risk, however, would always inform you in advance if this was a possibility.

Depending on your circumstances, you may be required to make a contribution towards your sequestration for four years. Any assets of value, which could include the equity in your home, must be realised.

Provided you co-operate fully, the Accountant in Bankruptcy may grant their discharge at the end of one year. Therefore, you have a duty to continue to co-operate with your Trustee and to pay a contribution for the remainder of the sequestration period.

 

Step 1

Speak to an approved money advisor or Insolvency Practitioner who will clearly explain the Sequestration process to you. They will advise whether Sequestration is an appropriate solution for you.

If you’re interested in finding out a little more about the potential minimum monthly payments required for different solutions, try our Debt Calculator. A member of our team will contact you shortly after submission to go through an in depth income and expenditure to provide you with all the options, but there is no obligation to make use of this service.

If you still believe that Sequestration is, to submit an application you must:

  • have lived in Scotland for more than six months
  • have debts of more than £1,500
  • not have been sequestrated in the last five years

Step 2

Your application for Sequestration will be submitted to the Accountant in Bankruptcy by the Insolvency Practitioner or money advisor.

The Accountant in Bankruptcy will award sequestration, set the level of your contribution, which may be nil and appoint a Trustee. The Insolvency Practitioner who submits your application is generally appointed as your Trustee.

Your application must contain either evidence of your creditor’s agreement or a Certificate of Sequestration and the cost of the application which is £200.

Step 3

Once sequestration has been awarded, your Trustee will contact you to discuss your affairs and to discuss the way in which your assets will be realised, if this is appropriate.

Your Trustee will contact your creditors to advise them that sequestration has been awarded and contact them on your behalf in the future.

Step 4

Provided you co-operate fully, the Accountant in Bankruptcy may grant your discharge at the end of one year. However, although you may have been discharged the sequestration process does not come to an end.

You must continue to co-operate with your Trustee whilst he is in office, normally, for a further three years. If your Trustee has assets to realise he will remain your Trustee until he has done so. If you have paid a contribution you will continue to pay this as set out in your contribution order.

What are the advantages of Sequestration?

  • Once you have been sequestrated, creditors are unable to pursue you or take any legal action against you to recover what they are owed.
  • The Insolvency Practitioner will contact your creditors, removing a source of stress.
  • Provided you co-operate fully, the Accountant in Bankruptcy may grant your discharge at the end of one year.
  • If you are receiving welfare benefits, these will not be classed as income for the purpose of calculating your monthly contribution.

What are the disadvantages of Sequestration?

  • Your credit rating may be affected and may affect your ability to obtain credit in the future.
  • If you are a homeowner and have equity in your property, or you have any other assets of significant value, your Trustee will be required to realise them. However, it may be possible to do so without the need to sell your home. If this is an issue the Trustee may suggest a Scottish Trust Deed instead, if this is affordable.
  • Your Sequestration will be displayed on an online Register of Insolvencies which includes details of all “live” cases plus those that were discharged in the past two years.

Frequently Asked Questions

Provided you co-operate fully, the Accountant in Bankruptcy may grant your discharge at the end of one year. However, you will be required to make monthly contributions payments for a further period of three years.

You are unable to include your Student Loan if it is covered by the Education (Scotland) Act 1980 c.44. You will remain liable to repay this debt.

If you are given money as a gift, you must inform your Trustee. Depending on the amount your Trustee may require you to make this available for your creditors. You must also inform your Trustee of any changes to your income.

There are some banks that will provide a basic bank account service and your Trustee can provide details. However certain banks will not allow individuals to maintain an existing account after sequestration, even if you do not owe them money. In some cases, if you have a joint account in which one party has been declared bankrupt, the bank may insist on that account being closed, and both parties opening a new account.

If you are unhappy with the way your sequestration is handled, you should speak to your Trustee. Insolvency Practitioners are members of an approved governing body. Your Trustee will give you details of their governing body and you can contact them if the matter cannot be resolved. You can also contact the Accountant in Bankruptcy, whose contact details and those of your Trustee’s governing body can be found in the useful links section of this website.

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