Can I file for sequestration if a debt collection agency is chasing me?

If you’re filing for sequestration, you’ve probably been pursued by creditors or debt collection agencies for some time, and may view bankruptcy as the best way out of serious debt.

When a debt collection agency is chasing you, it doesn’t stop you filing for sequestration, but it doesn’t necessarily mean they have to stop in their attempts to recoup the debt. This depends on the type of debt involved, as some fall outside the scope of bankruptcy orders.

Filing for your own sequestration

Before you file for bankruptcy in Scotland, it’s important to check that you meet all the conditions and requirements. An insolvency practitioner (IP) or approved money adviser can assess your eligibility by reviewing the level of your debt, income and outgoings.

You’ll receive a certificate of sequestration from your money adviser or licensed IP to demonstrate that you’ve met these conditions, and be able to prove your insolvency to the Accountant in Bankruptcy (AiB) by sending the certificate along with your application.

The certificate expires after 30 days, however, so it’s advisable to act quickly in this respect. Essentially, a certificate of sequestration confirms that you owe £1,500 or more in unsecured debt, are unable to pay your debts, have not been bankrupt during the past five years, and are resident in Scotland.

Sequestration and debt collection agencies

The debt collection agency chasing you won’t be able to prevent you from filing for sequestration, and in many cases cannot pursue you for the money once you’re officially bankrupt.

Those chasing payment of credit card or store card debt, for example, must contact only your Trustee with regard to the money that’s owed. This is one of the major advantages of filing for your own sequestration, as harassment from creditors and debt collectors can be relentless.

Other unsecured creditors face the same restrictions, and cannot stop you from declaring yourself bankrupt - these unsecured debts could include bank overdrafts and personal loans, payday loans, and catalogue debt.

When a debt collection agency continues to chase payment

There are several factors to consider in relation to ongoing contact from debt collection agencies when you’ve filed for bankruptcy:

• Is the debt to be included in your bankruptcy? If it isn’t included, the agency can continue to pursue you for money.
• Certain debts fall outside of any bankruptcy arrangement. These include court fines, student loans, child support and maintenance payments, and overpayments of some benefits.
• When you file for sequestration, a secured lender is entitled to repossess the asset that secured the loan. If this was a mortgage, they would be able to take possession of your home if you couldn’t keep up the repayments.

Scotland Debt Solutions can provide the professional advice you need when facing unmanageable debt. We’ll advise on your rights if a debt collection agency is chasing you, and assess whether there are any better alternatives to sequestration. We work from five offices around Scotland, and can arrange a confidential same-day meeting free-of-charge.