Getting a mortgage after sequestration

Please note – we cannot provide mortgage advice.

Sequestration is a serious form of insolvency action, equivalent to bankruptcy in the UK, which can affect your chances of getting a mortgage. Once placed into sequestration, your assets and equity will be transferred to the ownership of a trustee who will manage the sale in order to release cash and repay creditors.

After sequestration, you will receive a discharge notice which will officially mark the end of your bankruptcy. This is typically 12 months after the date of sequestration, on the anniversary that you entered into it. As a result, your chances of getting a mortgage will be limited. This will typically be based on your spending record and the timescale from when you entered into sequestration.

What are my chances of getting a mortgage after sequestration?

Many lenders will refuse a mortgage application if you have entered sequestration. The register of insolvencies will record all live cases of sequestration which typically run for 12 months if all terms are adhered to. The register of insolvencies is the Scottish register which records insolvencies of individuals and businesses. Sequestration will also be visible on your credit record for future lenders and banking providers. Following a period of six years; it will no longer be visible.

How can I improve my chances of getting a mortgage after sequestration?

Time will heal your chances of getting a mortgage as the more time bided from the discharge of your sequestration, the smaller the risk for the mortgage provider. This is dependent on your spending behaviour and whether it illustrates a responsible and trustworthy spending record.

Credit Card - A credit card is a common way to build up your credit record and depict to your mortgage lender that your spending behaviour has improved. By making small value purchases through your credit card and making the repayment within the month, you will be able to show that you are a responsible borrower and have no outstanding liabilities.

Electoral Register - Ensuring that you have a record on the electoral register will instantly improve your credit score. This is used to confirm your identity and the stability of your lifestyle based on your fixed address and how often you move residences. This check is typically performed when taking out mobile contracts, credit cards and other purchases which require an ongoing financial commitment.

Credit Record - Frequently checking your credit record can help track credit arrangements including overdraft facilities and credit cards. It will record if repayments are made on time or late, including defaults. Your credit report will also record whether you are registered on the electoral register.

Specialist Mortgage Providers

Amongst brokers and high street mortgage providers, it is worth noting that there are lenders who specialise in providing mortgages to those discharged from sequestration. Mortgages of this sort are typically easier to secure but there may be restrictions in place, such as high interest rates. The fees may be higher than expected and you may have limited access.

Securing a mortgage after sequestration can be a difficult and testing process; however, there are options available for discharged bankrupt individuals. Keeping a steady track of your credit record can help pinpoint your pressure points and how you can improve this. There are credit check agencies who can offer regular credit reports such as Equifax, Experian, and ClearScore.

If you would like more information on getting a mortgage after sequestration and how this can affect your options available, Scotland Debt Solutions can help. We can provide professional advice on how to ensure you have the best chance to qualify for a mortgage. Call the Scotland Debt Solution team for a same-day consultation at any of our four offices in Scotland, or a location of your choice.

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FAQ

FAQ on Sequestration

Am I likely to lose my home in sequestration?

It is possible that your home may need to be sold or remortgaged in order to raise money if you own part or all of it. This is not always the case, however, and much depends on whether the cost of raising money in this way makes it a viable option. This is a decision that only your Trustee can make.

Are there any disadvantages to Sequestration?

Losing control of assets, such as your home and car, is a possibility. Sequestration will be noted on your credit file for a period of time, which is dependent on certain factors determined by credit agencies and how creditors view the information. Your sequestration can be viewed in the public Register of Insolvencies. Your job may be affected if there are restrictions written down in your contract of employment regarding sequestration You won’t be able to act as director of a company

How does the Sequestration process start?

You can either sequestrate yourself, or alternatively a creditor owed more than £3,000 can start the procedure. To enter sequestration yourself you need an approved money advisor to agree that you are in fact insolvent, and that other procedures are not more suited to your circumstances. Once this has been established, they will issue a Certificate of Sequestration which is valid for 30 days. This is sent to the Accountant in Bankruptcy, along with the application for sequestration and the fee of £200. For a creditor to start the sequestration process, they have to be owed more than £3,000. They may already have sent you a Statutory Demand, and will lodge a petition for your sequestration with the court. If no single creditor is owed £3,000 they may get together to organise a joint petition.

How long does sequestration last?

You are normally discharged from sequestration after 12 months. You will be discharged after 6 months if you enter sequestration through the MAP route. Your Trustee will remain in office for a further period of two years, during which time they may continue to realise your assets. Even though you have been discharged, you must cooperate with your Trustee.

What are the advantages to sequestration?

Creditors will not be able to take further legal action against you, alleviating much of the pressure associated with being in debt Your Trustee becomes an intermediary between you and your creditors, dealing with all correspondence relating to your debts Once you are discharged you do not have to repay the debts which you had when you were made bankrupt, although there are some exceptions to this. You are still responsible for paying: fines, penalties, compensation and forfeiture orders imposed by any court; any liability due to fraud including benefit overpayments; any obligation to pay ongoing aliment; some students loans; and money owed to someone who holds a security on your property, such as a mortgage or secured loan. Apart from the exceptions listed above, your pre-bankruptcy creditors will not be able to take any legal action against you to recover their debts.

What are the eligibility criteria for sequestration?

You have to be resident in Scotland, owe more than £1,500 and be unable to meet payments as they fall due. Additionally, you must not have been in sequestration during the previous five years.

What happens after the initial 12 months of sequestration?

If you can afford to, you will need to continue making repayments from your income for a further period of 36 months. Your Trustee will remain in contact, and you are obliged to cooperate fully.

What happens to my car in sequestration?

If you own a car worth more than £3,000, or you have no real need for a vehicle, it may need to be sold to raise money for your creditors. Alternatively, your Trustee may ask you to sell it and buy a cheaper one so that you can put the difference to paying off your debts. If a vehicle is needed to get to work, however, selling it may not be the best option and you may be allowed to keep it.

What is sequestration?

Sequestration is a form of insolvency available to Scottish residents, whereby assets are transferred to the control of an appointed Trustee in order to pay off unsecured debts. It is very similar in nature to bankruptcy in the rest of the UK, and is seen as a measure of last resort to pay creditors and permanently write off debts. You can apply for sequestration yourself, or if one or more of your creditors are owed £3,000 or more they can apply to put you into sequestration in order to recover part or all of their debts.

What type of debt is included in a sequestration?

Unsecured debt including credit cards, loans and overdrafts are included in sequestration, as well as arrears on household debts such as utility bills and council tax. Any debt secured on an asset is not included. Nor are student loans, Child Maintenance payments, fines or overpayment of benefits.

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