Sequestration is only available for those who live in Scotland

Sequestration is a Scottish term for bankruptcy.

Your estate must handed over to the appointed Trustee and that Trustee is appointed to realise your estate for the benefit of your creditors. You may also be expected to contribute any surplus income generated from your employment over the period of sequestration.

When the Trustee has realised your estate, and provided you have fulfilled any request to contribute surplus income, your Trustee will pay any surplus funds as a dividend to your creditors once their annual fees and charges have been deducted and apply to be discharged as your Trustee.

Provided that you comply with your Trustee’s requests, sequestration will last for 1 year and you will be automatically discharged on the first anniversary of the commencement of sequestration. In some rare cases if you have surplus income you may be required to make additional contributions for upto 3 years.

Provided that you comply with your Trustee’s requests, sequestration will last for 1 year and you will be automatically discharged on the first anniversary of the commencement of sequestration. If you have surplus income you may be required to make additional contributions for up to 3 years.

Benefits

  • Your creditors will no longer be able to pursue you or take action against you to recover what you owe them
  • You will not have to make any further payments to your creditors
  • You will be entitled to keep any income from benefits or pensions
  • You can expect to be discharged after 1 year. You may have to continue to make a contribution for up to 3 years depending on your surplus income

Things you need to know

  • Any valuable assets you own, including endowment policies, will usually have to be sold
  • You may have to make a regular contribution for more than one year if you are in full time employment
  • If you come into any money or property after the date of your sequestration and before the date of your discharge, you may have to surrender these to your Trustee
  • You cannot obtain credit of more than £500 whilst sequestrated, unless you tell the provider that you are an undischarged bankrupt
  • You cannot start up or be involved in the day-to-day management of a limited company
  • You cannot act as a Member of Parliament, and there are certain other restrictions, such as acting as a member of any local council or school board, etc.
  • Your sequestration may be noted by credit reference agencies. You may have difficulties in obtaining credit after your discharge
  • If you choose to apply for your own Sequestration there is an administration fee of £200 payable to the Accountant in Bankruptcy.  There are no waivers or exemptions for the administration fee, but the Accountant in Bankruptcy will accept payment from a third party or allow you to make multiple small payments until the fee is paid in full.

For more information on sequestration, read our questions and answers.

Questions & Answers

What is sequestration?

Sequestration is the Scottish equivalent of Bankruptcy. Although the processes are very similar, there are a few key differences and we always look at the other debt solutions before we consider advising that sequestration is the best way to go.

If you are sequestrated, your estate is handed over to a Trustee and they are legally obligated to realise your estate for the benefit of your creditors. Sequestration lasts for one year; however, your ability to obtain credit may be affected for a longer period.

If you owe a creditor at least £1,500 and your apparent insolvency can be demonstrated to the Court, a qualifying creditor can petition the court for your sequestration. This may mean having to realise certain assets (not specifically excluded), including equity in your home, cars or any investments.

How much does sequestration cost?

You will have to pay £200 for the administration of your sequestration as well as the court fees. There are no exemptions or waivers from the administration fee but in certain circumstances, the court fees may be covered by legal aid.

How long will I be sequestrated?

The minimum period for sequestration is 1 year and, as long as you have fulfilled your Trustee’s requests during this period, you will be automatically discharged on the first anniversary of the commencement of your sequestration.

Will I get to keep my home if I am sequestrated?

If you have equity in your home (i.e. its value is in excess of any mortgage on the property), and you are unable to arrive at a suitable option for realising the equity such as a remortgage or third party assistance, then your home may have to be sold.

Will I get to keep my car?

Any car worth less than £3000 will automatically be excluded.

The Trustee will only be interested in any equity which exists in the car. If the car is subject to a hire purchase agreement, this will be taken into consideration when the Trustee is determining any available equity.

If your car is required to travel to and from work and you make a monthly contribution to the Trustee from your income, you may be able to continue to use the car. If your car is not required for this purpose, or if significant value could be realised from its sale, your Trustee may require the car to be sold. However, you may be allowed sufficient funds to buy a lower cost replacement for your continued use.

Who will know about my sequestration?

Your sequestration will be advertised in a publication called The Edinburgh Gazette. Most banks, building societies and other financial institutions subscribe to it but it is not usually bought by members of the public.

Details of your sequestration will appear online in the Register of Insolvencies which is publically available to view.

What is apparent insolvency?

Apparent insolvency means you are unable to pay your debts, and that at least one of your creditors has taken legal action against you. It means at least one of the following will apply:

  • Having obtained a decree in respect of a debt due to them, one of your creditors has served a charge for payment and you have failed to make payment within the 14 days allowed by the charge.
  • One of your creditors has served a Statutory Demand for Payment and you have not paid the sum due within the 21 day time limit allowed by the demand.

In addition, apparent insolvency may arise where you have given written notice to your creditors that you have ceased to pay your debts in the ordinary course of business or by the granting of a Trust Deed.

How do I contact you?

Take the first step to turning your debt around. By completing our debt enquiry form, we will advise whether we can help you with a debt solution and arrange a time to contact you to talk through the options.