Sequestration explained for Scots with personal debts

Sequestration is the Scottish term for bankruptcy, and is often seen as a last resort by those in personal debt. If you are considering applying for your own sequestration, or have creditors who are trying to force you into bankruptcy, you’re probably wondering what the process entails and how it will affect you.

Here we answer some of the main questions that clients ask us about sequestration, to make the system clearer and help you decide whether it’s going to be your best option.

How long will my sequestration last?

As long as you cooperate with the Trustee, your bankruptcy will last for 12 months unless you have entered under the Minimal Asset Process, in which case it will be six months. If you do not cooperate, or it is discovered that you have tried to conceal assets, then a Bankruptcy Restriction Order may be made against you which can last indefinitely.

The process does not end with your discharge, however, as the Trustee may need to continue to deal with your assets. You will be advised when they have also been discharged from their duties, and the bankruptcy period is over.

Can I have a bank account while sequestrated?

Many banks do not allow customers who are bankrupt to operate a bank account, and it may be frozen or closed down when you enter sequestration. Policy varies between banks, but you may be able to open a new basic bank account rather than a standard current account once you have entered sequestration.

What will happen to my wages or benefits?

You will be able to pay your wages or benefits into your new basic bank account. If you have sufficient disposable income, a contribution towards your debts will be made from your earnings.

What is the effect of sequestration on my gas, electricity and telephone?

Some service providers will prefer to use a pre-payment system if you are bankrupt, or have a meter installed in your home to reduce their risk of being exposed to further debt.

What happens to my debts after sequestration has ended?

Any debts remaining after you have been discharged from bankruptcy are written off, apart from a few exceptions that include court fines and some student loans. Your previous creditors can no longer pursue you for the debts, but you do remain liable for any incurred after your sequestration.

Is my credit rating affected once I am discharged as a bankrupt?

Your credit rating will be adversely affected by your sequestration for six years at least. During this time and beyond, you are likely to experience difficulty in obtaining finance, and will pay a higher rate of interest for any credit obtained.

Some specialist credit card providers offer ‘credit builder’ cards, which may be worthwhile. If you are eligible, they can help you rebuild your credit rating over a period of time.

What happens if I inherit money or receive a windfall during my sequestration?

Any financial gains during your sequestration must be declared to your Trustee, and will be used to repay your creditors. This includes being the beneficiary of a deceased estate.

If you have further questions or need more detail about any of these points, we can arrange an initial meeting free-of-charge. Scotland Debt Solutions has five offices in Scotland, and offer professional guidance in complete confidence.