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.

Perhaps you can avoid bankruptcy, call us on 0800 970 2698 and find out. Alternatively you can complete and submit your SOA for one of our experts to review.

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.

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. Unfortunately there are no exemptions or waivers from this fee.

Take control of your debt

If you need to speak to someone then call Debtwatchdog on 0800 970 2698 where you will receive expert advice from our debt counsellors. Alternatively 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 forum is here to offer you help and advice whenever you need it.

How good will it feel to free yourself from your debt? If you need help to free yourself from debt call Debtwatchdog on 0800 970 2698 or visit our forum.