Sequestration

Sequestration is the Scottish equivalent of bankruptcy and can allow for debts to be written off.

It’s an informal insolvency process that is an option if you’re unable to repay your debts. To be eligible for sequestration you must owe debt of £3,000 or more. A licensed Insolvency Practitioner takes control of your assets and acts as the liaison between creditors on your behalf.

Hillcrest Finance can help individuals in Scotland if they feel sequestration would be an appropriate course of action. Find out more about how to declare bankruptcy in Scotland, and how advisers at Hillcrest Finance can help.

Bankruptcy Advice Scotland

Scotland has some slight differences when it comes to bankruptcy and writing off debt compared to the rest of the UK. It helps to have someone at hand who can help you understand what these differences are and where nuances in the law lie.

For example, temporary changes in the law (as a response to Coronavirus) have relaxed debt thresholds levels. Knowing this, and getting responsive help, is something our team can advise on.

Why is Bankruptcy called Sequestration in Scotland?

It is simply the terminology used in Scotland for declaring an individual bankrupt. If you’re living elsewhere in the UK, we recommend visiting our Bankruptcy page for more information.

How does Sequestration in Scotland work?

Sequestration is a process where insolvency is declared when someone can’t pay back their debts within a reasonable timeframe. The process typically occurs under two circumstances:

  1. When an individual gets in touch with a court or advisor to apply for sequestration
  2. When an individual owes creditors more than £3,000, and they force a declaration of sequestration if the debtor can’t pay

In either scenario, the help of a financial advisor is needed to act as a trustee/ insolvency practitioner on the individual’s behalf.

What effects does Sequestration have?

When someone enters sequestration, there are consequences of bankruptcy which should be known about. Restrictions are put in place to help ensure payments can be made, and to also ensure that business restrictions are adhered to. For example, an individual in sequestration cannot act as a company director or create a new business.

There are also very strict credit measures in place. Even after the initial 12 month period is over and payments have been made, details remain on the sequestration register in Scotland for at least six years, which has a big impact on credit rating.

Advantages of Sequestration

Sequestration can be a viable option as:

  • It is possible to write off all unsecured debts
  • Creditors can’t reject the sequestration
  • Creditors can no longer take legal action to recover debts
  • Your creditors can no longer contact you and will deal directly with your IP.
  • Interest, fees, and charges are frozen – creditors can only claim for the outstanding balance as at the start of sequestration
  • If asked to contribute, it will be an affordable monthly payment that’s calculated in consideration with your living expenses.

Disadvantages of Sequestration

Sequestration has some clear disadvantages, including :

  • Your credit rating is affected for six years
  • It will be difficult for you to obtain credit in the future
  • You must declare that you are bankrupt to anyone you are looking to obtain credit from
  • It could have implications on your employment
  • Assets such as your home or car may be sold to release funds

How much does it cost to apply for Sequestration in Scotland?

A sequestration application comes with a cost of £200. It is submitted to the Accountant in Bankruptcy (AIB) with the agreement of creditors owed more than £1,500 or a certificate of insolvency from an Insolvency Practitioner. These are both areas our team can help with if you’re unsure which to use.

Can I borrow money while in Sequestration?

Credit availability is impacted as a result of sequestration, and it is typically recommended that you don’t seek out credit during this time. The limit for borrowing money is £2,000 while paying off debts.

Will I have to give up my house and car if I declare Sequestration?

Whether or not valuable assets need to be used as leverage in helping handle your debts will be up to your trustee/advisor to work out. Remember, sequestration is based on the fact that you aren’t able to settle debts with creditors. If assets like your car or home are seen as ways of clearing the debt, they may be used.

Most advisors will try their best to help avoid this.

What alternatives are there to Sequestration?

It is possible to avoid sequestration if other debt solutions can be found. In Scotland, it is common (depending on the amount owed) to opt for a Trust Deed or Debt Arrangement Scheme if eligible.

If you need more information on debt solutions and live in Scotland. Hillcrest Finance can help. Call our advisors on 0141 478 0862. or get in touch via WhatsApp. They can talk with you about your current situation and what the best course of action entails.

Get in touch with us about Sequestration today