Sequestration
Drawing a line under unmanageable debt.
Sequestration is the Scottish legal process equivalent to bankruptcy in England and Wales. A trustee takes control of your assets to pay creditors, and most remaining included debts are written off — usually after one year.
Free debt counselling, debt adjusting and providing of credit information services is available to customers by contacting MoneyHelper.
Discharge
After 1 year
Contributions
Up to 4 years
Awarded by
The AiB
Credit file
6 years
What's included and excluded?
Unsecured debts — credit cards, personal loans, payday loans and utility arrears — can be included. Secured debts such as mortgages and car finance, child maintenance and court fines cannot.
How does it work?
Either you or a creditor petitions the Accountant in Bankruptcy (AiB). Once granted, a trustee is appointed to deal with your assets. If you have regular income you may be required to make contributions through a Debtor Contribution Order for up to four years. After one year of compliance you are discharged and remaining included debts are written off.
Advantages
It is possible to write off 100% of your debt.
Your Trustee will deal with your creditors – taking away the pressure of the constant phone calls and distressing mail.
Creditors cannot take legal action against you to recover their debt.
Interest, fees and charges are frozen – the creditors can only claim for the outstanding balance due as at the date of sequestration.
One, affordable monthly payment will be made, giving an allowance for all general living expenses and household bills.
You will normally be discharged from Sequestration after 1 year (assuming the Trustee does not have cause to delay the discharge).
The application to the AiB does not involve court proceedings.
Sequestration stops or removes the effect of existing diligence e.g. an earnings arrestment or an Inhibition.
Disadvantages
Assets of a significant value are likely to be sold for the benefit of creditors.
You are unable to act as a director of a limited company or be involved in the formation, promotion or day-to-day financial management of a limited company.
It may harm your employment prospects, both now and in the future.
Student Loans are not discharged by Sequestration.
Adverse impact on your credit rating.
£150 application fee* to be paid to the Accountant in Bankruptcy.
You cannot apply for credit of £2,000 or more, without telling the creditor that you have been made bankrupt and are under this restriction.
You cannot apply for credit of any amount when you already have debts of £1,000 or more, without telling the creditor that you have been declared bankrupt and are under this restriction.
Your bankruptcy will be registered on the Register of Insolvencies, a publicly available online register of all insolvencies in Scotland.
You are unable to act as a Member of Parliament or a Justice of the Peace.
You may be in breach of certain contractual obligations by being made bankrupt e.g. tenancy/lease agreements, various licences, employment contracts, HP agreements, insurances etc.
Bankruptcy has a 4-year acquirenda term i.e. the trustee has claim on assets acquired for a period of 4 years from the date of sequestration e.g. inheritance, lottery win, compensation claims etc.
* If you are in receipt of certain prescribed social security benefits (e.g. Universal Credits, Child or Working Tax Credits) or you are assessed as having no surplus income then there is no application fee payable.
Alternatives worth checking first
Sequestration is a significant step. We always explore gentler routes first to help you choose the path that best protects your future.
Sequestration, or something lighter?
Find out in minutes whether sequestration is genuinely your best outcome — or whether an alternative gets you further.