Sequestration is form of Scottish insolvency that is designed to be used only as a final option when an individual is unable to meet their unsecured debt.


Personal debt, Bankruptcy & Sequestration

Bankruptcy is referred to as Sequestration in Scotland – both terms mean the same thing.

For many individuals sequestration is deemed as a worst-case scenario, however it is an extremely useful and helpful procedure for those who are struggling with the stress of debt.  If it is not likely that an individual can pay debts in full, and another insolvency solution is not available to them, a sequestration may be the best option.

In Scotland an individual can apply for their own sequestration by way of an application to the Accountant in Bankruptcy, or have sequestration forced upon them by a creditor petitioning the court.

Once the sequestration is awarded, the Trustee (who administers the process of the sequestration) will take over all correspondence with creditors. Creditors will also be prohibited from raising any action against the individual and any charges/interest would be frozen from the date of sequestration.

If breathing space is required to allow an individual to apply for their sequestration or obtain further advice, a Moratorium can be applied for. The Moratorium is registered on a public register (the Register of Insolvencies) and stops creditors taking any action during the period being 6 months.

What is the Sequestration process?

Sequestration can be a straightforward way to reset an individual’s financial affairs and in most instances all debts and liabilities are written off when the individual is discharged after just 12 months.

An individual can apply for sequestration when they are unable to pay their debts as they fall due. This is done by completing what is known as a Debtor’s Application form, which is filed with the Accountant in Bankruptcy. Upon awarding the Sequestration, The Accountant in Bankruptcy will allocate the case to a Trustee to administer the estate.

It is the Trustee’s role to realise all of the assets of the estate to pay a dividend to creditors.

A Trustee (a qualified Insolvency Practitioner) is appointed, who takes control of the individual’s estate, which encompasses all assets owned or assets acquired by the individual within 4 years from the date of the sequestration. An affordable contribution may be payable from disposable income where appropriate, the value of this contribution is calculated using the common financial tool, which is used to assess household income and expenditure. This payment is made monthly over a period of 48 months and would be assessed every 6 months to ensure the payment remains affordable.

Those subject to sequestration proceedings have a legal obligation to cooperate with the Trustee and will be subject to certain restrictions whilst they remain undischarged from the sequestration, which is usually 12 months. The restrictions of the sequestration do not generally affect the individual’s day-to-day living however, they must be adhered to.

Once the individual has received the discharge from the restrictions of the sequestration, their obligation to cooperate with the Trustee remains. The Trustee normally continues in office to allow the financial position to be monitored, monthly payments to be ingathered and realise assets.

The pros and cons of Sequestration

The advantages

  • Deals with all unsecured debts.
  • Stops legal action by unsecured creditors.
  • If you have sufficient income, a Debtor Contribution Order will be put in place, whereby you have to pay a monthly amount for a maximum period of 2 years. This should be an amount you can afford and will leave you with enough income to live on.
  • Creditors cannot reject the Sequestration.
  • Interest, fees and charges on debts are frozen.
  • In most cases, the Sequestration will end after a year or less.

The disadvantages

  • Your assets (with some limited exceptions) will be sold so that your creditors can be repaid some or all of what they are owed.
  • You will have to pay an initial fee.
  • The Sequestration will appear on a public register.
  • Your credit rating will be negatively affected for six years.
  • You must declare you are insolvent to anyone from whom you attempt to get credit during your Sequestration. After it has ended you must continue to disclose your Sequestration if asked the specific question.
  • It could affect your employment.
  • If you are in business, it may be very difficult to continue your trade.

Advice on personal debt and Sequestration

For more information on personal debt and Sequestration, we offer an initial free consultation to review the situation and make recommendations on the best way forward. If we think that Sequestration is the best route forward, our specialists can support the individual at every step of the way through the process.

Contact our Scottish Office on +44 (0) 141 648 2030 to arrange a no obligation and confidential call with one of our Partners.

For information on fees in relation to Sequestration, click here.

Helpful, supportive and clear advice about options

“We approached Steve Parker of Opus when our business, which was in the hospitality sector, began to get into difficulties. Steve was helpful and supportive and gave clear and timely advice regarding our options. Resultantly the company was placed into Administration which was handled by Steve and his team in a fair and very professional manner. As a consequence we were able to emerge with a much slimmed down business which has flourished over a number of years allowing us to build up considerable reserves sufficient to see us through any future period of uncertainty”