A Guide to Sequestration
For many people living and working in Scotland, it can often be difficult keeping track of certain debts and payments owed to various creditors. While there are a number of different options available via debt solutions advice to help you find the best and most convenient route to releasing yourself from debt and financial stress, one of the main options businesses and individuals take is to apply for sequestration. This is an option that is only available in Scotland, and as such it is regarded as the Scottish equivalent of applying for bankruptcy.
Neither bankruptcy, nor a sequestration order, need to be scary. As financial advisors and debt solution experts, it’s our job to help you understand and find the best possible avenues through which you can relieve yourself of debt that may be crippling your credit rating and bogging you down with stress. This is just one of the main avenues we advise to people and firms who approach us for advice and support – and while it may be the very last option for many Scottish individuals and enterprises, it is nevertheless one which should be taken as completely viable – should your needs and circumstances fit. We will, of course, discuss such potential in this brief guide.
What is a Sequestration Order?
Taking on a sequestration means that you are effectively applying for bankruptcy in an effort to settle debts and to ensure that you owe no further money to creditors. In a way, it is an option to ensure that the slate can effectively be wiped clean – but it is a process which can come with various risks, weights and measures, meaning that you should never take a blind leap into such arrangements. That, of course, is why we are here to help you make such decisions should they be convenient and relevant for your needs.
The way that bankruptcy operated in Scotland changed in 2008 – and since then, it has become far easier for debtors to take greater control over the money they owe and to essentially cease further debt activity – and interest – from being piled on top. The previous problems that arose pre-sequestration in Scotland related to creditors allowing certain amounts of debt to pile up, accruing interest and allowing debtors to fall into further and further debt without any hope of paying money back. Therefore, this change to the way such finances work in Scotland has been welcomed by many.
A sequestration order will allow your assets to be handed over to an appointed trustee, who will then essentially have the right to oversee your total financial affairs and will declare your intention for bankruptcy in writing once the court has made one of these orders. As with bankruptcy, this process essentially means that your existing assets are pooled to help pay off any existing debt. It is a viable option to take if you are looking to relieve stress from creditor appeals and any legal action they may be poised to take against you.
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What are the Benefits of a Sequestration in Scotland?
As per bankruptcy laws, you will essentially be legally entitled to hand over your valuable assets to a third party trustee who will handle creditors on your behalf. Declaring bankruptcy or applying for a sequestration order can be seen to be the last resort for many people – and while declaring such a status or applying for an order will largely be the final approach to removing debt for good, some people may see the act of bankruptcy as nothing to be proud of. While it is not an ideal situation, applying for this is nothing to be ashamed of – and, in many ways, it can be hugely beneficial to you. Our team of debt specialists can help you decide if this is the right choice, so feel free to contact us.
Sequestration or bankruptcy status essentially protects you from creditors while a trustee handles your affairs, and you do still have legal rights to own certain possessions – but assets such as cars, properties and more besides must be taken into account. When debt reaches this stage it can often mean that it is written off within a short period of time – meaning that, while you do have bankruptcy status and risk losing one or more of your major assets to settle your existing debt, it is often a great option to take if you are in dire need of wiping the slate clean – though it comes with heavy repercussions for your credit rating for several years. As such, we do discuss the sequestration Scotland register with those who may benefit from it – though while it may seem fairly attractive in some ways, it is still a process which will require you to submit to certain ramifications and potential long term effects.
Sequestration Eligibility and Facts
To be able to apply for sequestration, you must have been a Scottish resident within the past year or are currently residing there legally – and your debts must be higher than £3000 in total. Applying for this type of debt relief will require you to apply for a Certificate of Sequestration – which, thankfully, is a free process – which will then allow you to effectively declare bankruptcy within 30 days of it having been issued.
It’s also incredibly important that your bankruptcy history, if at all, is of considerable age. This means that you cannot have declared bankruptcy or have applied for a sequestration order within the past five years to be able to qualify. Once you have declared bankruptcy, the order will reside on your credit report for up to six years from the start date, providing you are released from the status without issue.
Being sequestered should never be taken lightly or as a quick route out – while it is a great way to wipe clear any debt that may be available, it has a huge effect upon your existing credit and can therefore be detrimental to your financial health short term as well as long term. We are always happy to approach bankruptcy and sequestration applications as potential avenues for debt solutions, but we will endeavour to suggest other means of support or debt relief ahead of the option being discussed in detail.
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Alternative Debt Solutions
As debt solution experts, it’s our job to ensure that you have as much useful advice and support as possible offered to you before you even consider the possibility of a sequestration order. There are other potential avenues to follow which may provide you with effective debt relief and may even relieve existing creditors from approaching you. These may include:
If you are not in Scotland, a similar option would be Registering for Bankruptcy as a final solution to debts you can't pay back. Just like sequestration in Scotland this is a big decision to make so we'd advise speaking to an expert about what will happen.
Applying for Trust Deeds can be similar to sequestration orders without the hefty credit penalties – they enable you to transfer your estate to a trustee who will handle creditors on your behalf, preventing any further action if the Deed is protected.
One of the most common ways to relieve these money worries is to get an IVA for Debts, and we can offer help with this. It involves agreeing on a manageable amount which you can afford to repay to your creditors.
When drawn up and proposed to creditors, Debt Management Plans may help to relieve you of even the heaviest of debt. A debt management advisor will be able to help you draw up a plan of action and proposal for creditors which may be accepted instead of full payment of debts up front. This is a very popular avenue for those who may find themselves balancing several different creditors at once, and it is one we will discuss with you if applicable to your situation.
Many people in Scotland opt for a DAS or Debt Arrangement Scheme to help with managing their current repayments. You'll work with a professional advisor to set up an agreement with an amount you are able to pay back
The option of Consolidating Loans is available if you would prefer to make one monthly repayment rather than juggling with multiple creditors. Our team can advise you on how this works and help you set this up.
In some cases, F&F Settlement motions may be worth proposing to creditors if you have a relatively low debt to clear, or if it is agreed during consultation that offering a part payment to those seeking debt may effectively relieve you of such obligations. This, once again, is a popular route to take as it can mean that the amount of debt you have to pay is effectively decreased to lower financial pressure. It is an option we will discuss with you in further detail far ahead of a last resort option.
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As well as the long term costs that sequestration can bring to your credit score, you must also be prepared to pay £200 up front to the Accountant in Bankruptcy, who acts on behalf of the Scottish Government. There will be no further fees expected of you to pay to an insolvency practitioner, but you will be advised of any and all costs due during your application process.
Looking for Debt Advice
It is never comfortable being in debt, and we understand that it is a process that can create further stress the longer you stay in the spiral. Therefore, we are always on hand to provide impartial, unbiased support to individuals, couples, families and businesses who may be struggling to appease certain creditors. There is no reason why you should need to consider sequestration or bankruptcy right away – let us take a closer look at your financial affairs and propose a plan to help your finances get back on their feet with minimal effects levelled at your credit score.
Contact us today on 0808 223 4188 to book in a consultation or email us for advice at your convenience – let us help you relieve yourself of debt today.