Sequestration

It involves you agreeing to pay what you can afford for 48 months and your Trustee gathering in your assets which are not excluded. These assets are turned into cash to cover the costs of bankruptcy and your debts.

What is the criteria for a Sequestration?

Bankruptcy prevents creditors being able to pursue you or take legal action against you to recover what they are owed. You will not have to make any further payments directly to creditors, although you have to pay what you can afford into your Bankruptcy for 48 months, if this is a Full Administration Bankruptcy. You are only bankrupt normally for 1 year, although this period can be longer if you do not cooperate with your Trustee.

To qualify for Sequestration, you have to meet conditions set out for the Minimal Asset Process “MAP” or Full Administration.  You need to apply for a Certificate of Sequestration which demonstrates you are unable to pay your debts as they become due. There is no charge to obtain this certificate.

Most money advisers, insolvency practitioners and some people who work for insolvency practitioners are authorised to issue this certificate. You can then apply for your own bankruptcy, but this must be within 30 days of the certificate being issued.

Minimal Asset Process “MAP”

This is a process available for people with little assets. To be eligible you must meet the following conditions:-

• Owe at least £1,500
• Owe no more than £25,000
• Your assets must be worth less than £2,000 (with no single asset worth more than £1,000). 
• You live in Scotland or have lived in Scotland for the last year
• Not been bankrupt through the Minimal Asset Process in the last 10 years
• Be only receiving benefits or you have no surplus income which has been assessed by a money adviser

The fee is £50 but this can be waived if you are in receipt of certain benefits. Your Trustee will be The Accountant in Bankruptcy, unless you have nominated an Insolvency Practitioner who agrees to act as your Trustee.

You get your discharge after 6 months if you have fully co-operated with your Trustee, but your Trustee will continue in office for a further 6 months. There are restrictions while you are bankrupt, such as not being able to borrow more than £2,000 either solely or jointly without disclosing your status and that you cannot engage in business unless certain criteria is met.

Full Administration Process

If you do not meet the Minimal Asset Process, and you want to make yourself bankrupt, you must meet the following criteria:-

• Owe total debt of £3,000 or more.
• Live in Scotland or have lived in Scotland for the past year.
• Not have been made bankrupt in the past 5 years.
• Your DAS has failed and a creditor has taken legal action against you.
• Pay an application fee of £150.

There is further criteria needed which either involves having confirmation from a money advisor that you are insolvent or you have a certificate of sequestration or one of your creditors is willing to make you bankrupt. If you have a failed Trust Deed only your Trustee or creditors can make you bankrupt.

Your Trustee will be The Accountant in Bankruptcy unless you have nominated an Insolvency Practitioner who agrees to act as your Trustee.

What happens to my assets and surplus income?

Bankruptcy is a complex process, and your Trustee will want to interview you to get evidence of your assets (what you own), your debts and your income and expenditure.

If you have surplus income after deducting your reasonable monthly costs of living, your Trustee will manage your Debtor Contribution Order “DCO” which will last for 48 months. Any pension income will be taken into account when assessing if you can make a DCO.

You will be asked to complete a form every 6 months to confirm your circumstances. You must co-operate with your Trustee. Failure could result in your bankruptcy lasting longer or restrictions being placed on you.

You Trustee will gather in your assets (the things you own) including land and buildings and sell them to pay the costs of bankruptcy and your debts. There are assets exempt from bankruptcy including:-

• Items needed for day-to-day living including clothes, furniture, household linens, etc
• Tools of trade up to a value of £1,000
• You may also be able to keep a car that is needed by you to earn a living up to a value of £3,000

It is possible that your home may need to be sold or remortgaged in order to raise money if you own part or all of it. This is not always the case, however, and much depends on whether the cost of raising money in this way makes it a viable option. This is a decision that only your Trustee can make

For more information about the bankruptcy process and it’s effects, there is a Debtor’s guide (need a link to this which is on aib.gov.uk /sites/default/files/debtors_guide_0.pdf

Benefits

• Sequestration offers debt relief and financial restructuring in Scotland.
• Assets like your home and car may be protected during sequestration.
• It offers a fresh start by forgiving eligible debts at the end of the 12-month process.
• Any monthly contributions are based on what you can realistically afford.
• Sequestration stops creditor action, providing a respite for people struggling with debt.

Risks

• Sequestration is shown on a public register.
• It will impact your credit rating for six years.Some assets may be sold to repay creditors during the process.
• Your employment opportunities may be restricted during and after sequestration.
• Obtaining credit may be challenging, affecting financial flexibility post-sequestration.

Important Information

The Debt Advisor Ltd is regulated by The Financial Conduct Authority. This means we are able to offer debt advice and deliver both formal and informal solutions. We are a commercial organisation and if you choose a solution we provide fees will apply. Fees vary dependent upon solution and will be discussed with you.

Please take a look at the information we provide for each solution, and the applicable fees. There are various options that exist to help you deal with your debt problems. All debt solutions should be very carefully considered.  The Debt Advisor do not provide Scottish Debt Solutions, if you are based in Scotland, struggling with debt issues and need debt advice on your options, we’ll put you in touch with one of our trusted providers. 

If you then decide to use their services, we will receive a fee for introducing you, or for the preparatory work we complete. Please note, fees are payable if ongoing services are provided however, these fees will be clearly explained to you before entering into any solution.There are sources of free debt advice and services. You can find out more by contacting the Money Helper (Scotland) on 0800 138 7777 or by visiting their website