What is sequestration?
Sequestration is the Scottish equivalent of Bankruptcy. Although the processes are very similar, there are a few key differences and we always look at the other debt solutions before we consider advising that sequestration is the best way to go.
If you are sequestrated, your estate is handed over to a Trustee and they are legally obligated to realise your estate for the benefit of your creditors. Sequestration lasts for one year; however, your ability to obtain credit may be affected for a longer period.
If you owe a creditor at least £3,000 and your apparent insolvency can be demonstrated to the Court, a qualifying creditor can petition the court for your sequestration. This may mean having to realise certain assets (not specifically excluded), including equity in your home, cars or any investments.
How much does sequestration cost?
You will have to pay £100 for the administration of your sequestration as well as the court fees. There are no exemptions or waivers from the administration fee but in certain circumstances, the court fees may be covered by legal aid.
How long will I be Sequestrated?
The minimum period for sequestration is 1 year and, as long as you have fulfilled your Trustee's requests during this period, you will be automatically discharged on the first anniversary of the commencement of your sequestration.
Will I get to keep my home if I am sequestrated?
If you have equity in your home (i.e. its value is in excess of any mortgage on the property), even if it is jointly owned and the equity cannot be released for the benefit of creditors, it may have to be sold.
Will I get to keep my car?
The Trustee's will only be interested in any equity which exists in the car. If the car is subject to a hire purchase agreement, this will be taken into consideration when the Trustee is determining any available equity.
If your car is required to travel to and from work and you make a monthly contribution to the Trustee from your income, you may be able to continue to use the car. If your car is not required for this purpose, or if significant value could be realised from its sale, your Trustee may require the car to be sold. However, you may be allowed sufficient funds to buy a lower cost replacement for your continued use.
What is apparent insolvency?
Apparent insolvency means you are unable to pay your debts, and that at least one of your creditors has taken legal action against you. It means at least one of the following will apply:
- Having obtained a decree in respect of a debt due to them, one of your creditors has served a charge for payment and you have failed to make payment within the 14 days allowed by the charge.
- One of your creditors has served a Statutory Demand for Payment and you have not paid the sum due within the 21 day time limit allowed by the demand.
In addition, apparent insolvency may arise where you have given written notice to your creditors that you have ceased to pay your debts in the ordinary course of business or by the granting of a Trust Deed.
How do I contact you?
Take the first step to turning your debt around. By completing our debt enquiry form, we will advise whether we can help you with a debt solution and arrange a time to contact you to talk through the options so we can tailor a solution to your individual circumstances.