In order to be declared bankrupt in Scotland, you must owe a total debt of at least ÂŁ1500 and be living in Scotland (or have done so during the last year). In addition, you must not have already been made bankrupt in the last 5 years.
If you are considering sequestrating yourself, you will probably be experiencing severe financial difficulty. The best thing to do is speak to someone about it sooner rather than later. There are many options for Scottish residents so it is important to keep in mind that this is not a hopeless situation and provided you act on it you can become debt free.
You can apply for your own sequestration or use a qualified insolvency practitioner to act on your behalf. If you decide to apply for it yourself there is a ÂŁ200 application fee which is payable to the Accountant in Bankruptcy (Aib). It is possible to pay this in instalments, but there are no exemptions to paying it â€“ you canâ€™t go through sequestration if you canâ€™t pay the fee. If your application is approved, a Trustee will take control of your assets and depending on how much you owe to creditors a proportion of your assets could be sold off to pay for outstanding debts.
After a year, you will be discharged from the bankruptcy process, although you may be asked to continue making payments for up to another two years. Any unsecured debts that you cannot afford will be written off after you are discharged.
How does the sequestration process work?
Applying for sequestrationIf you've sought advice and decided that sequestration is the right route for you, then you can apply for your own bankruptcy by downloading a debtor application pack from the Accountant in Bankruptcy (AiB). Alternatively, you can instruct an Insolvency Practitioner to do this on your behalf.
The application pack is quite lengthy but self-explanatory. Youâ€™ll be required to input your personal contact details and then answer a series of questions about your income, assets, debts and general financial situation. In addition youâ€™ll need to send a range of supporting paperwork in with your application such as wage slips, bank statements, evidence of any benefits, proof of assets and copies of credit agreements etc.
Being declared bankruptThe AiB will usually award bankruptcy within 5 days of receiving a complete application form which meets the sequestration criteria. At the point of being declared bankrupt, youâ€™ll need to hand over any assets you have to your Trustee who can either be an appointed Insolvency Practitioner or the AiB.
Assets could include property, shares, savings and even jewellery - anything you own of value. Your Trustee may need to sell your assets and this is where things get tricky if you own your homeâ€¦ you could be at risk of losing it. You Trustee will then manage your assets until youâ€™re discharged of your bankruptcy or until your assets are disposed of.
How long does sequestration last?You'll be discharged from your bankruptcy after a year, providing youâ€™ve met the obligations as set out by your Trustee. After that time, any remaining debt will be written off and youâ€™ll be debt free, ready for a fresh start and able to start rebuilding your credit again.
Taking the decision to go through sequestration should not be done lightly and that's why we recommend seeking professional advice first to see if an alternative debt solution is available to you, such as a Trust Deed. Please get in touch for impartial advice and so that we can answer any questions you may have to help you make a decision.
Advantages of Sequestration
- Can be discharged after 12 months
- Debt written off in full
- Some debts that other debt solutions don't covered can be included such as HMRC and VAT debts
- Can be implemented by you rather than a third party
Disadvantages of Sequestration
- Adversly affects credit rating
- At risk of losing your Home, car and other assets
- May have to pay into sequestration for 4 years if you can afford to
- May affect certain jobs
Luckily in Scotland there are government backed alternatives to bankruptcy that may be more suitable to your situation. Fill out the form on the right to see if you qualify for a Trust Deed or DAS and avoid bankruptcy.