What happens after you are discharged from sequestration (bankruptcy)?
September 4, 2017
Being discharged from sequestration represents a key moment in becoming debt-free, and signifies the beginning of an improved financial situation. The sequestration process may appear to be relatively short at 12 months when compared with other official debt relief procedures, but it doesn’t necessarily mean the end of your obligations at this time.
Your Trustee remains in office until they have realised your assets, completed all administration relating to your case, and ensured that creditors have recouped as much of their debt as possible.
How long does sequestration last in Scotland?
Bankruptcy in Scotland generally lasts for 12 months, after which time, if you’ve met all the terms and conditions you’ll be officially discharged. A specific form of sequestration, called the Minimal Asset Process (MAP), also exists for those with a low income and few assets, and its term is usually six months.
When you’re discharged from sequestration in Scotland you may have further financial obligations to meet, however, but this depends on your individual financial circumstances. In the case of a ‘standard’ bankruptcy rather than MAP, you might have to make ongoing payments to creditors, but in both cases you’re likely to face continued limitations on obtaining credit and other forms of borrowing.
Bankruptcy discharge – what happens next?
Although discharge from standard sequestration often takes place after a year, this isn’t necessarily the end of your financial commitment. You may need to repay creditors from your wages if you earn a regular income.
This formal arrangement is called a Debtor Contribution Order (formerly an Income Payment Order), and lasts for 48 months in total. At the start of the sequestration process, your Trustee uses the ‘Common Financial Tool’ to establish how much you can afford to contribute on a monthly basis, and this amount is factored in alongside the handing over of your assets.
In some cases the Trustee can extend your bankruptcy term – if you haven’t co-operated fully in the process, for example, or failed to disclose information about new or existing assets.
Sequestration and your credit file
One of the major consequences of sequestration in Scotland is the ongoing effect on your ability to obtain credit. Details of your bankruptcy remain on the Register of Insolvencies for five years, and on your individual credit file for six years.
Lenders may be reluctant to grant credit or borrowing for a considerably longer period of time, however. You’ll find that borrowing in general is more expensive, with limited access to mortgage deals and smaller items such as mobile phone contracts.
You aren’t automatically notified of your discharge from sequestration, but you can request confirmation from the Accountant in Bankruptcy (AiB) for a small fee. Your Trustee is discharged from their role when all creditor claims have been satisfied, and they have dealt with all your assets.
If you need more information about bankruptcy in Scotland, and what happens after you’re discharged, we can provide professional guidance and advice. Scotland Debt Solutions operate from five offices around Scotland, and offer a free same-day meeting to discuss your situation.
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