Introducing Sequestration

At Trust-Deeds.co.uk we believe that Sequestration (the scottish term for Bankruptcy) should be only be used as a last resort to solving debt problems.

If you cannot pay your credit commitments then Sequestration may well be the correct option for you. Alternatively, other solutions such as a Protected Trust Deed or debt arrangement plan, offer different routes to help pay back your creditors without having to declare Sequestration and will not have the same damaging effect on your credit history.

Sequestration is a form of insolvency that results in a person’s assets being transferred into the control of an appointed Trustee so that they can be used to satisfy creditors to the greatest extent possible. Your estate means all the money that you owe, and any assets that you have. Following your sequestration, the companies and banks that are owed money (your creditors) must deal with your Trustee. They are no longer allowed to pursue you or take action against you in respect of the money owed. Your Trustee’s responsibility is to realise assets and assess if you are able to afford to make a contribution from your income for a period of four years. Your Trustee will divide up the monies ingathered equally amongst your creditors, and they must write off the balance that they do not receive.

There is no legal requirement as part of the sequestration for your creditors to receive any payment. Sometimes they receive nothing. If your estate does not have sufficient funds to enable any payment to be made to your creditors, then they will legally have to write off all of what you owe to them. The legislation that allows this to happen is all contained within the Bankruptcy (Scotland) Act 2016.

It is important to note that your trustee does not have to deal with your rented property, or your home if there is no equity (you owe more on the mortgage than the house is worth). Where there is equity in your property, it is only that equity that the trustee has an interest in. Where there is an asset that the Trustee must deal with, the asset does not necessarily have to be sold (though can be). For example a third party you propose (e.g. a family member, friend, or relative) may “buy out” the Trustee’s interest in the asset, or you may buy this out after your 1 year discharge. A “buy-out” may be by instalments over an agreed repayment period. This is most commonly how any interest in the equity in your home, or your car would be dealt with. Most other assets are generally sold. It is important that you have an understanding of how any assets you have will be dealt with before you commit to entering into a Sequestration. A WB Debtcare advisor can guide you in this regard.

Trusting that you properly co-operate with your Trustee throughout the sequestration agreement, you should be discharged from the arrangement twelve months after you were deemed bankrupt. However, if you do not fulfil the requirements of the Trustee, they have the right to postpone your discharge. The cost of your Sequestration is deducted directly from your estate, and approved by the Accountant in Bankruptcy. You will not get a separate bill. Your initial consultation with us before committing is free of charge.