What type of debt is included in a sequestration in Scotland?

 Sequestration is Scotland's form of bankruptcy, designed for people who cannot repay their debts. If you're considering sequestration, one of the most important things to know is which debts will be included in the process and which debts you'll still be responsible for afterwards. This knowledge is crucial for making an informed decision about whether sequestration is the right solution for your financial and personal situation.

Understanding sequestration in Scotland

Sequestration is a legal process that allows individuals in Scotland who cannot pay their debts to essentially have them written off. During sequestration, a trustee takes control of your assets and affairs, and after a period (usually 12 months), those debts included in the sequestration are discharged, meaning you're no longer legally required to pay them.

However, not all debts are treated equally in sequestration. Some debts are included and will be written off, while others remain your responsibility even after you have been discharged from sequestration.

Debts that are NOT included in sequestration

Several types of debt are not discharged through sequestration, meaning you'll remain fully responsible for paying them even after going through the bankruptcy process:

• Student loans - Student loans are not included in sequestration and will continue to be payable according to the normal terms and conditions.
• Court fines - Fines imposed by criminal courts, including motoring fines, are not discharged and must still be paid.
• Child maintenance - Ongoing child support payments and spousal maintenance obligations continue after sequestration.
• Debts arising from fraud or deliberate wrongdoing - Any debts that arose from fraudulent activity or deliberate misconduct are not discharged.
• TV licence arrears - Outstanding television licence payments are typically not included in sequestration.
• Damages awarded against you by a court - If you've been ordered by a court to pay damages to another party, these obligations typically survive sequestration.

Understanding Secured debts in Sequestration

Secured debts require special consideration in sequestration:

Mortgages - Your mortgage is secured against your home. In sequestration, your home may be sold to pay creditors, with any remaining mortgage debt typically being written off. However, if you have significant equity in your home, the trustee will likely sell it.

Secured loans - Loans secured against assets like your car will need to be addressed. The trustee may sell the asset, with any shortfall potentially being written off as part of the sequestration.

Hire purchase agreements - While the debt is included, you'll likely need to return the goods to the finance company, as you don't own them until the final payment is made.

What happens to joint debts during Sequestration?

If you have joint debts with another person, such as a partner, sequestration will only discharge your portion of the debt. The other party will remain fully liable for the entire debt amount, so it's important to consider the impact on joint debt before proceeding with sequestration.

What happens to debts taken out after Sequestration?

Any debts you incur after your sequestration begins are not included in the process. You'll be fully responsible for paying these debts according to their terms. This is why it's important to manage your finances carefully during and after sequestration.

What happens to business debts in Sequestration?

If you're self-employed or run a business, business debts are generally included in sequestration. However, the situation can be complex, particularly if you operate through a limited company. Business assets may be sold by the trustee, and you may face restrictions on running a business during the sequestration period.

How Scotland Debt Solutions can help

Knowing which debts will be included in a sequestration can be complex, and individual circumstances may affect how certain debts are treated. Before applying for sequestration, it's essential to get professional debt advice to understand exactly which of your debts will be included and which will remain your responsibility.

At Scotland Debt Solutions our team of personal debt advisors are here to help you understand your options and ensure you receive the expert help and guidance you need during times of financial worries. Contact a member of the team today and take the first step today.