Scottish Bankruptcy (Sequestration)
Is sequestration your best option?
Bankruptcy (known as sequestration in Scotland) allows people who have no realistic chance of paying off their debts in a reasonable timeframe, the opportunity to pay what they can, then no longer be liable for the rest.
In order to qualify for sequestration, your debts must be greater than the value of any assets you have, and you must be resident in Scotland or have lived in Scotland within the last six months.
The first step is to see a money adviser, who will look at your debts, income and expenditure and draw up a statement of your financial position. They should advise you whether you might qualify for sequestration and if there are any other debt options which might be suitable for you. They should also explain the advantages and disadvantages of bankruptcy as well as the consequences.
If you would like to go ahead with sequestration, and your money adviser agrees it’s a suitable option for you, they will refer you to a qualified Insolvency Practitioner. We have Insolvency Practitioners in-house so if you get advice from us, we can help you from start to finish.
The Insolvency Practitioner (IP) will look at how much you can afford to pay, if anything, towards your debts. They’ll also look at whether you have any assets of value, such as property or a car. You should be able to keep a modest car, and the IP will look at options for releasing value from your home without having to sell it. This might include remortgaging, looking at whether a friend or family member could purchase part of your property, or extending the length of time you have to make contributions from your income. The IP will work out how long you might have to contribute for – this is usually three years but might be longer.
During and after sequestration
Sequestration allows you to start again in a relatively short period of time. If you co-operate with all the terms of the bankruptcy, you might be discharged from your debts after as little as 12 months (though your contributions may continue for longer). However, sequestration has long-term consequences. Sequestration stays on your credit report for at least six years from the date of sequestration, and even after you are discharged, you will find it harder to obtain credit and you may not be offered the best rates. Details of your sequestration will also be entered on a public online register. However this is mainly used by credit reference agencies and lenders.