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Difference between Sequestration (Bankruptcy) and a Debt Arrangement Scheme (DAS)

For Scottish residents there are three specific debt-help solutions designed to get you out of the red and back into the black over a period of time. If you have large personal debts that you simply cannot afford to pay and creditors are chasing you for payment, it may be time to consider one of these solutions.

In this guide, we’ll discuss the differences between two of these solutions; the debt arrangement scheme (DAS) and sequestration (also known as bankruptcy). Each process has its similarities but also a number of key differences which we will shed more light on in order to bring clarity to your situation and potential options.

While sequestration and a debt arrangement scheme have a number of similarities, they also have numerous differences which are important to recognise. A DAS is effectively a statutory repayment plan whereby you have come to a point where you need real help with the debts you can’t afford and want to put a structure in place to repay creditors, though these creditors are not forced to agree to it. If one or more creditors object to the Debt Payment Plan then the fair and reasonable test shall be applied by the Debt Arrangement Scheme (DAS) Administrator to decide whether to approve or reject the DPP. However, in sequestration, creditors must adhere to its terms.

Realising funds
In Sequestration the Trustee shall look to realise your share of equity in any assets owned by you for the benefit of the creditors. In addition to this the Trustee shall ingather contributions from any disposable income you have adopting a standard approach to this calculation taking into account your essential living costs. You will be expected to make contributions for a period of 48 months should your finances allow.

In a debt arrangement scheme, a regular monthly payment for all unsecured debts in the debt payment plan will go to a Payment Distributor who will then distribute to your creditors. It’s important to differentiate that a DAS allows you to repay your debt in full over a manageable period of time whereas a sequestration will provide debt relief and discharge you from the debts (subject to certain exceptions) you have incurred after a period of as little as 6 month. Albeit, if you have disposable income you will be obliged to pay for a four year period.


You may bedischarged from the obligations of sequestration sequestration after a period of as little as 6 months provided you comply with your Trustee. If you fail to comply the Accountant in Bankruptcy can decide not to discharge you. A debt arrangement scheme can last for several years depending on the amount of debt you have and the amount you are able to repay on a monthly/weekly basis
If you have a Debt payment Plan under the Debt Arrangement Scheme an entry will be recorded in the DAS Register, which is a public register. If you have been sequestrated there is an entry in the Register of Insolvencies, again a public register.

The Process
In order to enter a sequestration or Debt Arrangement Scheme you must have sought advice from a Money Advisor or Insolvency Practitioner. The Money Advisor/Insolvency Practitioner will review your Financial position and ascertain the most appropriate option for you.

With both a debt arrangement scheme and sequestration, the ultimate aim is to be financially stable and debt-free. With each solution, you will be required to repay your creditors through monthly repayments and/or through proceeds raised from the sale of assets.

A debt arrangement scheme will last until all debts are repaid. By entering into a DAS, this won’t affect your home or mortgage providing you keep up with your repayments. You can exclude all assets or choose to realise assets to make lump sum payments. In contrast to the regular monthly payments of a debt arrangement scheme, sequestration will see an insolvency practitioner realise your share in equity in any assets owned by you. You have no choice to exclude any assets from the sequestration. Most assets automatically vest in your Trustee. Plus you are required to make an income contribution towards your debts should you have sufficient disposable income to do so.

Credit Rating
Both sequestration and debt arrangement schemes will have an adverse affect on your credit rating which is unlikely to recover for six years, even if all debts have been fully repaid sooner.


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