Sequestration the Scottish equivalent of bankruptcy – writes off debts, but has significant future consequences
In a nutshell Sequestration order is the official term for bankruptcy in Scotland. Sequestration order is a type of insolvency suitable if you’re dealing with debts that you would not be able to repay within a reasonable amount of time.
What debt problems is sequestration Scotland suitable for?
Sequestration order is the best debt help for those with debt problems that are so serious that they can’t reasonably repay their debts.
Bankruptcy must be proven to be a debt solution that is suitable for your circumstances. You may be deemed to be insolvent if:
- You’ve received a ‘charge for payment’ more than 14 days ago and you’ve not been able to pay the debt.
- You’ve received a ‘statutory demand’ more than 21 days ago and you’ve not been able to pay the debt.
You could be suitable for sequestration Scotland if:
- You have debts of £3,000 or more.
- You live in Scotland or have lived there at some point in the past 12 months.
- You haven’t been declared bankrupt over the last 5 years.
Our debt expert’s opinion on the pros and cons of sequestration scotland…
Advantages of this Sequestration Order
- Sequestration is a serious and final debt solution that can offer you a fresh start.
- Once the sequestration process is complete your creditors should no longer contact you.
Disadvantages of this Sequestration Order
- You may have to sell your property or car.
- Your bankruptcy will lie on your credit file for six years.
- Bankruptcy will make securing future credit significantly more difficult for at least six years.
Worried about debts that won't go away?
FAQs – Sequestration Scotland
What happens if I have a low income and limited/no assets?
If you only have a modest income and very few, if any, assets, the sequestration process Scotland is slightly different. In this instance you would enter bankruptcy through what is known as MAP (‘Minimal Asset Process’).
Will I have to deal with my creditors?
No. Once a Trustee is appointed they will serve as the negotiator between you and your creditors. Your Trustee is there to help you settle any disputes with your creditors. They will also act as your support throughout the process.
Will I still be able to access credit?
Your access to credit will be significantly limited. You won’t be able to access more than £2000 in lending until your sequestration order has been discharged and six months have passed.
I have mortgage arrears and I’m currently in the process of being repossessed. Could sequestration stop this?
Unfortunately, sequestration Scotland won’t stop your home from being repossessed, as it only covers unsecured debt.
Will my car be repossessed?
Your car does count as an asset, however typically cars that are worth less than £3,000 aren’t included in sequestration scotland. If your car is valued at more than this, your Insolvency Practitioner (IP) may require that you sell it to purchase a cheaper model, with the difference going towards repaying your creditors.
Will sequestration order affect my future credit score?
Your Sequestration order will remain on your credit record for six years from the date it begins. Over this period any lender who checks your credit file will see that you’ve been declared insolvent, which will severely impact your chance of being approved for credit.
After six years, your Sequestration order will be removed from your credit record and you can start working on improving your credit score.
What is a Certificate of Sequestration?
To be eligible for Sequestration order you need to show that you’re insolvent. The clearest demonstration of insolvency is called a ‘Certificate of Sequestration’. This certificate is valid for 30 days, and can be issued by Authorised Money Advisors, Insolvency Practitioners or any qualified member of their staff.
However, there are criteria that, if you meet, you won’t need to show that you’re insolvent before petitioning for sequestration.
The criteria are:
• You owe more than £1,500
• You earn minimum wage, or you work less than a 40-hour week
• You don’t own any land or property
• You have no more than £10,000 in assets (with no single asset worth more than £1,000)
How long can I use the certificate for?
The Certificate of a Sequestration order is valid for 30 days. This is because it acts as an up-to-date overview of your financial circumstances.