Debt Resources > Debt Solutions > Bankruptcy (Sequestration)

Sequestration is the Scottish term for bankruptcy and it is only available for people living in Scotland. This is one of the solutions one has for dealing with debts he cannot pay. A sequestration procedure will free a person from overwhelming debts and allow them to make a fresh start, which is subject to several restrictions. The sequestration procedure will also make sure your assets are fairly shared among creditors.

Is Sequestration right for me?

If you wonder whether sequestration is the right choice for you, you should know that anyone can be sequestrated. Thus, if you cannot meet one or more of your debt obligations within their due time, you should consider this option. There are several conditions you have to meet when before being declared bankrupt.

First, the total amount of your debt has to be over £1,500 and you must be living or have lived during the last year in Scotland. If you have been declared bankrupt within the last five years, you cannot be declared again. You will also need to pay the sequestration fees, a creditor has to agree to make you bankrupt or you have to be an apparent insolvent. In order for bankruptcy to be declared, one or more of your creditors will have taken some legal action against you in the Sheriff Court.

There may be several alternatives to sequestration, but you need to be in control of your finances in order to succeed. If you are not, you should look carefully at the pros and cons of being declared bankrupt in Scotland.

What are the advantages of Sequestration?

The most significant advantages of sequestration are the debts written off and the fact that it will remove all the pressure one is suffering from his creditors. On the other hand, you will lose control of all your assets, including your car, house and any household effects, which will be sold if they are deemed to be of important value. Generally, you will be allowed to keep essential items, which you will need for daily living, things like furniture, clothes, household linens, floor coverings, toys, educational items and anything used for cleaning and cooking. You will also be able to keep tools with a value of up to £1,000, which may be necessary for a trade.

What are the disadvantages?

Among other disadvantages of this financial procedure can be mentioned the report in the Edinburgh Gazette and in the local press of your sequestration, a thing that can damage your image in the community. Additionally, while sequestrated, you will not be able to incur credit with a value of more than £250, unless you let your lender know about the fact that you have been sequestrated.

Regarding your future businesses, you will have to get court permission for forming, be a part of or managing a limited company and inform all people concerned if you intend to trade in a business under another name.

Finally, you will not qualify for a Student Loan and if sequestration is granted, you will not be allowed to be a member of the Local Authority, a Governor of a School, a Member of Parliament or a Justice of the Peace. Your sequestration will be also transmitted to the Credit Referencing Agency, thus making it difficult for you to obtain different types of credits even after you have been discharged.

Bankruptcy is a very serious matter that may affect negatively your financial situation for the years to come. This is the reason it should always be a last resort for your debt problems. There are several options for those who want to avoid it and you should consider them all before looking into being declared bankrupt.

Entering into a debt management programme is a viable solution, meaning that you will get an arrangement with your creditors for paying your debts over an extended period. Debt Arrangement Schemes are also available, consisting of formal arrangements between you and the creditors, regarding paying multiple debts over extended periods through debt payment programmes. Finally, you can choose to enter into a Protected Trust Deed. This is an agreement similar to the English Individual Voluntary Arrangement and consists of the option of paying a fraction of your debt over a determined period of time and the rest being written off after this period ends.

How much will it cost to be sequestered?

Being sequestered will generally cost £100 for administration on top of the court fees. You cannot be exempted for the administration fees, but you may get legal aid regarding the court fees. After one year, you will be discharged from bankruptcy, but a note of it will remain on your credit file for the next six years.