Sequestration

Advantages of Sequestration

• 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 of Sequestration

• 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.