Sequestration, which corresponds to bankruptcy in England, is a legal process tailored for individuals grappling with overwhelming debt and lacking foreseeable means to settle it. This remedy enables the discharge of debts following a stipulated period of making monthly payments, encompassing various forms of indebtedness ranging from personal loans to council tax and credit card debt.
To qualify for sequestration, you must owe more than £3,000 and fulfill residency criteria in Scotland or demonstrate business dealings within Scotland within the past year. The procedure entails appointing a licensed Insolvency Practitioner (IP) as a trustee, tasked with assuming control of your assets and managing communications with your creditors.
An application fee of £200 is required, with creditors being afforded the opportunity to contest the trustee’s fees on an annual basis. At My DebtPlan, we refrain from charging setup fees for sequestration.
The application entails submitting requisite forms to the Accountant in Bankruptcy (AiB) and selecting a trustee who will then negotiate with your creditors to secure their agreement. Your disposable income undergoes evaluation to ascertain monthly contributions, typically spanning a four-year period. Assets may be liquidated to contribute to debt settlement, and upon fulfilling the term, you are granted discharge from the arrangement, usually emerging debt-free.
Sequestration carries ramifications for your credit rating over a six-year period, posing challenges in accessing credit during this duration. While it offers respite from unsecured debts and safeguards against creditor legal actions, it may also impede your credit access and certain employment prospects.
Your residence and vehicle may become subject to sale or equity release to facilitate debt resolution. Nevertheless, certain exemptions exist based on the valuation of these assets.
Sequestration differs from Debt Arrangement Scheme (DAS) mainly in duration and debt resolution approach. DAS entails a protracted repayment plan without any debt write-off, whereas sequestration typically culminates in debt discharge post a specified timeframe.
Sequestration represents a significant decision necessitating thorough deliberation. If you confront insurmountable debt with no viable repayment avenues, it may furnish a route to financial solvency. However, it’s imperative to weigh the enduring implications and explore alternative remedies prior to proceeding.
Lucy Novo Deakin is a licensed insolvency practitioner in the UK by the Insolvency Practitioners Association (IPA).
My Debt Plan Ltd provides insolvency solutions to individuals, specialising in IVA’s. All advice given is provided in reasonable contemplation of an insolvency appointment. Where you are not suitable for an IVA, we may refer you to one of our trusted partners who specialise on alternative solutions, and as such we will receive payment for the introduction if you enter into a debt solution with one of our partner companies.
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To find out more about managing your money and getting free advice, visit Money Helper, an independent service set up to help people manage their money.
*Our advice on your options is always free. We will always notify you if a solution you choose has any cost.
**Of 2,381 IVA cases approved between January-December 2023, the average expected write off assuming successful completion is 74%.
A debt write off amount between 25% and 75% is realistic, however, the debt write off amount will differ for each customer upon their individual financial circumstances and is subject to approval of their creditors. Any remaining qualifying unsecured debt in your IVA will be written off, however some unsecured debts will be excluded, such as court fines, child maintenance and student loans, therefore you will need to continue paying these both during and after the IVA.
