Sequestration is the term for bankruptcy in Scotland and involves the transfer of an individual’s assets to a Trustee. These assets are then sold to allow some of the debt to be repaid.
It can be a suitable debt solution in many instances, particularly when the debtor’s financial situation is only likely to worsen, although sequestration is generally used as a measure of last resort.
What is sequestration?
Sequestration is a formal insolvency procedure that is available if you are a resident of Scotland and are dealing with extreme debt. It offers the opportunity for a fresh financial start, as once your creditors have been repaid as far as possible, the remaining debt is written off.
A Trustee is appointed to administer the process, and deals with creditors on your behalf. The Trustee assesses whether you can afford to make monthly contributions in addition to the sale of your assets – if so, they receive the payments and distribute them to your creditors.
Who is eligible for sequestration?
You may be eligible for sequestration if:
- You live in Scotland
- You owe unsecured debt of £1,500 or more
- You have not been sequestrated during the last five years
If you own few assets and earn a minimal income, you may be eligible for the Minimal Asset Process (MAP). This enables you to enter sequestration under a different route, with the process typically lasting for six months as opposed to 12 months under ‘standard’ sequestration.
Which debts can be included in sequestration?
Unsecured debts can be included in sequestration. Also known as ‘non-priority’ debts, they include:
The sequestration process
If sequestration is established as the most suitable option, an application is made to the Accountant in Bankruptcy (AiB). Your Trustee then takes control of your assets and decides whether a monthly financial contribution to your debts is feasible.
Sequestration generally lasts for 12 months as long as you meet all your obligations and co-operate fully with the Trustee, but you may be required to make a monthly contribution from your earnings for up to 48 months.
Could sequestration be right for you?
Sequestration may be an appropriate solution if your total debts exceed the value of your assets, and there is no possibility of repaying your debts in the foreseeable future. It offers you the opportunity to escape unmanageable debt, but the process is only used if there are no other options available.
This is because sequestration involves the sale of all your assets, including your home, and you face severe financial restrictions, potentially for up to four years. Once sequestration ends, however, you will be debt-free and able to start again without the worry and stress of creditor action being taken against you.
If you are struggling to repay high levels of unsecured debt, and would like more information about sequestration in Scotland, please contact our expert team for a free same-day consultation.
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