Sequestration

What is a sequestration?

Sequestration (also known as ‘full administration bankruptcy’) is a debt solution available in Scotland to help you clear your debts when you realistically can’t afford to repay them.

It’s a form of insolvency, a legal process of writing off debts. In this solution, most debts are usually cleared after a year.

How does sequestration work?

If you have a free advice session with us, we’ll create your budget to explore all your options and work out if sequestration is a suitable solution for you to consider. If it is, and you choose to go ahead, you’ll need to submit an application to the Accountant in Bankruptcy along with evidence that you’re eligible to apply. If approved, you’ll be appointed a trustee overseeing your application, assessing the worth of your assets, and looking closely at your income and expenditures. They will have the option to sell your assets to raise the funding to pay back your creditors. You can speak to your local CAB (Citizen’s Advice Bureau) for help to set up your Sequestration.  
It usually lasts a year, after which the debts included will be written off. In some cases, you may be required to make payments from your earnings into the bankruptcy for up to four years.

Assessing your budget and debts

• During an advice session, we will review your budget to determine whether you can afford to repay your creditors.

Applying for sequestration

• If sequestration looks to be a suitable solution and you decide to go ahead, you’ll need to submit an application form along with the required evidence to the AiB website.

Single fee

• There’s a one-off set-up fee of £150 to apply for sequestration, but if your income is solely made of state benefits, this fee may be waived.
• You can pay this in instalments and may be eligible for charitable help, but you’ll need to apply for this yourself.
• You’ll only be able to apply for bankruptcy once the fee has been paid in full.

Debt write-off at completion

• After completing your sequestration term, any remaining debts are written off, and you’ll no longer be liable for them.

Am I eligible for sequestration?

Sequestration may be a suitable option for you if:

• You can’t afford to repay your debts: If your debts are greater than your assets and you can’t pay them back, bankruptcy could help.
• You owe money to multiple creditors: If you’re struggling to manage several repayments, bankruptcy can write off most unsecured debts after 12 months.
• You have limited assets: Your assets may be sold to help repay creditors, but certain essential items are protected.
• You have a debt level of at least £3000: Your total debt level of what you owe to all your creditors must be at least £3000.

Note: Sequestration is only available in Scotland. If you live in England, Wales, and Northern Ireland, Bankruptcy may be an option.

What are the pros and cons of sequestration?

Benefits of sequestration

• Debt Relief: If you have no money to repay your debts, sequestration can help you clear them.
• Legal Protection: Creditors can’t chase you for payment or take legal action against you once you have applied for sequestration.
• No Long-Term Payment Plan: Unlike some other solutions, sequestration doesn’t require ongoing monthly payments if you’re in receipt of benefits or you’re unable to make payments towards your debts.
• Clear End Date: Sequestration usually lasts 12 months, after which most debts are cleared.

Things to consider

• Impact on Assets: Once officially declared, control of your assets passes to a trustee, such as the Valuable items, like property or high-value possessions, may be sold to repay debts, but essential everyday items are protected. If you’re self-employed, business assets may also be at risk.
• Credit Impact: Sequestration will affect your credit rating for six years from the date of the sequestration, and your name will appear on the public Register of Insolvencies (ROI).
• Borrowing and Employment Restrictions: While you’re going through sequestration, there will be restrictions on borrowing money, starting a business, and taking on certain jobs. Moreover, you won’t be able to act as a Director of a Limited Company during the period of the Sequestration.
• Possible Income Payments: If you have disposable income, you may be asked to make affordable payments towards your debts for up to four years.

We’re here to help you explore your options and find the right solution.

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What debts can be included in Sequestration?

There’s no limit to the amount of debt or the number of accounts you can include in sequestration.

It covers most unsecured debts, such as:

• Bank loans
• Overdrafts
• Credit cards
• Payday loans
• Council tax arrears

Some debts aren’t covered by sequestration, such as:

• Mortgage arrears
• Secured loan arrears
• Student loans
• TV licence arrears

If you have these types of debts, you’ll still need to keep up with these payments outside of your sequestration.

FAQs

Want to know more? We’ve answered some of the most common questions about sequestration here.

How long does sequestration last?

Usually, you’ll be discharged from sequestration after one year. If you’ve entered sequestration through the MAP (Minimal Asset Protection) route, you’ll be discharged after six months.

How does sequestration affect my credit rating?

Sequestration can impact your finances. It will be recorded on your credit file for six years, which may make it harder to get credit, loans, or a mortgage.

You may face restrictions applying for credit over £2,000 without disclosing your sequestration.

Will my income be affected?

If you have surplus income and aren’t on state benefit-only income, you may need to make payments toward your debts for up to four years. Your Trustee will assess your income and essential living costs to determine if payments are required.