Sequestration (Scottish Bankruptcy)

Sequestration is the Scottish legal term for bankruptcy. It involves a Trustee taking control of your assets and liabilities (debts) for the fixed period of one year. There are currently three ways that you can become sequestrated.

  1. A creditor can petition to the Sheriff Court to make you bankrupt if you owe them more than £3,000 and all other debt recovery avenues have been exhausted
  2. You can make yourself bankrupt via the Low Income Low Asset route (LILA). This means you do not earn more than 40 hours x national minimum wage per week (benefits and tax credits are excluded), you do not own any property and that you do not have assets individually worth £1,000 or collectively worth £10,000. If this criteria applies to you, you can obtain a Debtor's Application, complete it, sign a statutory declaration to state you meet the LILA criteria, and send it to the Accountant in Bankruptcy together with the application fee of £100. The AIB will then decide whether to award your bankruptcy. They will contact you in writing to advise of the outcome, and if it has been awarded they will contact your creditors to inform them of your bankruptcy. You may still have to pay a financial contribution to your bankruptcy, and if you do, you will pay these payments for 3 years.
  3. You can make yourself bankrupt via the Apparent Insolvency route. This means at least one of your creditors has pursued you through the court process and served you with necessary paperwork to prove apparent insolvency, and you have been unable to pay your debts. In this type of bankruptcy, you can nominate a Trustee or if you don't, the AIB will be the Trustee. The trustee will get in touch to discuss your situation, and will contact your creditors to inform them of your insolvency.

The same rules apply whether someone makes you bankrupt (a creditor's petition) or you make yourself bankrupt (a debtor's petition). As with a trust deed, a trustee is appointed to deal with your assets and liabilities.

Advantages of Sequestration:

  • Bankruptcy lasts for a fixed period of one year, allowing a fresh debt-free start
  • You gain protection from any further debt recovery action, such as wages arrestment
  • The trustee deals with your creditors on your behalf
  • No court appearances
  • No fees to pay, other than £100 application fee (Debtors Application)

Disadvantages of Sequestration:

  • Any assets you own may require to be realized. This may mean that your asset is sold or a third party (usually a friend or relative) pays the value of the asset to the Trustee on your behalf to prevent it being sold
  • Your credit rating will be affected for around 6 years
  • Sequestration may prevent you from doing some jobs
  • Certains types of debt cannot be discharged by sequestration such as student loans or any liability due to fraud
  • Your bank may close your account once you have been sequestrated

Find out more about Sequestration (Scottish bankruptcy)

For all you need to know about Sequestration, please download our free fact sheet or contact us for some free, no obligation help and advice.

Campbell Dallas Debt Solutions - if you have debt problems, we have debt solutions.

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