personal insolvency advice

Sequestration - Personal Insolvency Scotland

In Scotland the term for personal insolvency is Sequestration. Sequestration is the process of a person being formally declared bankrupt, followed by the transfer of their assets to an independent Sequestration Trustee.

Applying for Sequestration

In order for an individual to be able to apply for their own sequestration it is necessary that they have debts of greater than £1500 and that a creditor has served either;

  • A Charge for Payment and fourteen days notice have elapsed or,
  • A Statutory Demand and the required 21 days have elapsed or,
  • An Earnings Arrestment (sometimes also known as an Attachment of Earnings) arising as a result of a Charge.

If none of these have incurred they will instead need to seek the permission of one of their creditors.

The Sequestration Trustee

The main duties of the Sequestration Trustee are to:-

  • sell the assets and/or property of the bankrupt where a financial benefit can be obtained for the creditors.
  • and if the bankrupt is in employment they may also seek a regular contribution from this income.

Sequestration Advantages and Disadvantages

As with insolvency elsewhere in the UK, entering into sequestration has both benefits and drawbacks when compared to other alternate solutions to personal debt problems. The advantages of sequestration are as follows:

  • Creditors will be unable to take further action to recover the debt.
  • At the end of the sequestration no futher payments will need to be made.
  • After being discharged, usually after a maximum of 3 years, you will be completely debt free.

There are however several disadvantages of entering in sequestration including:

  • Any valuable assets owned may be sold to repay the debt.
  • If you own your own home you could lose it.
  • If in regular paid employed it may be necessary to pay a contribution from this income.
  • Any money or property acquired during the sequestration period will need to be surrendered to the Trustee.
  • It will be unlawful to obtain credit exceeding £250 without first informing the new lender of your status as an undischarged bankrupt.
  • Your Sequestration will be noted by the Credit Referencing Agencies and you may have difficulty in obtaining credit even after your discharge.

Alternatives to Sequestration (Trust Deeds)

Before entering into sequestration it is advisable to first seek the opinion of a professional financial advisor who specialises in helping with personal debt problems. They may be able to suggest a better alternative such as Trust Deeds.

Legislation exists in Scotland to provide for something called a Protected Trust Deed. The legislation has been specifically designed to help those consumers in Scotland with overwhelming debts, who can no longer afford to continue making their payments.

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