What is a Bankruptcy Restriction Order? (BRO)

Your Trustee will inform the Accountant in Bankruptcy (AiB), and if their suspicions are upheld, a BRO of 2-15 years can be made depending on the seriousness of the case.  Restrictions can cover your personal, financial, and professional life, and have a far-reaching effect in many instances.

Why would a Bankruptcy Restrictions Order be granted?

A BRO may be made for failing to cooperate with the trustee at any stage - not supplying the information required for sequestration, for example, or misleading the trustee on the level of debt you owe.

Other examples can include:

  • Selling assets at below their market value
  • Incurring additional debt when you know that it cannot be repaid
  • Fraudulent activity
  • Giving preference to certain creditors over others
  • Gambling
  • Failing to keep proper financial records

What is the effect of a Bankruptcy Restriction Order?

Restrictions involve your personal and business life and include, but are not limited to, the following:

  • Having to inform potential lenders of your Bankruptcy Restriction Order if you’re seeking credit in excess of £2,000 (either singly or jointly), or you’ve incurred debts in excess of £1,000 since being made bankrupt, and are seeking any amount of further credit.
  • Not taking office as a local authority member
  • Not acting as a company director or taking an indirect role in forming, managing, or promoting a company, without express permission from the courts

Breaking these restrictions is a criminal offence, and can result in a prison sentence.

Bankruptcy Restriction Order during or after discharge

A Bankruptcy Restriction Order can be made during or following your discharge from bankruptcy.  The Accountant in Bankruptcy will let you know in writing about the potential BRO, and you have 14 days in which to respond.

If you feel it is incorrect you should let the Accountant in Bankruptcy know in writing, and include any evidence to support your case. This will then be investigated, a decision made as to whether to impose bankruptcy restrictions on you, and for what length of time.

If a Bankruptcy Restriction Order is imposed, it will be added to the Register of Insolvencies (RoI) - a public register that is free to access via the AiB website.

What is an Interim BRO?

The AiB can also make an Interim Bankruptcy Restrictions Order if they believe a debtor may continue to worsen their creditors’ financial position, or otherwise contravene the terms of their sequestration.

This provides more time to make the longer-term decision on whether a full BRO is required, and also its potential duration.

For more information about Bankruptcy Restriction Orders and how they might affect you, call our experts at Scotland Debt Solutions. We specialise in helping Scottish residents to escape debt, and can offer you a free same-day meeting to establish your situation.

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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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