Sequestration

If your trustee considers that your conduct has been dishonest or blameworthy in some way, either before or during your Sequestration, they will report you to The Accountant in Bankruptcy. Accountant in Bankruptcy (AiB) may seek to impose restrictions on your behaviour which can last between 2 and 15 years. Details of the restrictions are recorded on the Register of Insolvencies.

The following are examples of behaviours that could be considered dishonest or blameworthy:

incurring debts that you knew you had no reasonable chance of repaying;
giving away assets or selling them at less than their value;
gambling or making rash speculations or being unreasonably extravagant;
not co-operating with your trustee during the period of your bankruptcy.
AiB will consider the evidence provided by your trustee and impose Bankruptcy Restriction Order (BRO) of up to 5 years or may make an application to the sheriff asking for a BRO to be made against you for up to 15 years. The AiB or sheriff will consider the evidence and will decide whether they should impose a BRO. If they do, you will remain subject to certain restrictions for the period stated in the BRO even after you are discharged from your bankruptcy. You are committing a criminal offence if you fail to comply with the terms of your bankruptcy restrictions.

Bankruptcy restrictions can include:

you must disclose your status to a credit provider if you, either alone or jointly with another person, wish to get credit of more than £2,000;
you must disclose your status to a credit provider if you wish to get credit of any amount and already have debts of £1,000 or more;
you may not be nominated, elected or hold office as a member of a local authority, conform to Section 31 of the Local Government (Scotland) Act 1973.
This is not a full list of the bankruptcy restrictions which may be placed on you.

Further information on bankruptcy restrictions is available from the AiB.

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If you apply to The Accountant in Bankruptcy for your own Sequestration, you will normally be made bankrupt within 5 working days of AiB receiving your application. It may take longer if AiB has to write to you to ask for more information or evidence.

Your application may be refused if you do not provide evidence that you satisfy the conditions for bankruptcy, or if you have not paid the correct fee.

When a creditor or a trustee in a trust deed asks the sheriff to make you bankrupt, you could be made bankrupt in less than 2 weeks.

You will be served with a document called a warrant to cite, which tells you when your case will be heard by the sheriff at a hearing. You can attend the court hearing yourself or someone can represent you. At the hearing the sheriff will decide if you should be made bankrupt.

If you appear or are represented at the hearing and provide evidence about your circumstances, the sheriff may decide to postpone their decision if they are satisfied that you will pay what you owe within 6 weeks or if you plan to repay your debts through the Debt Arrangement Scheme.

If you provide evidence that you have paid everything you owe to the creditor before the day of the hearing, the sheriff will not award bankruptcy.

If you do nothing the sheriff is likely to award the bankruptcy.

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Creditors
If you owe someone money they may be able to petition the Court for Sequestration. Your creditors can ask a sheriff to make you bankrupt if:
• you owe them at least £3,000 – this will include any fees, interest or charges added to what you owe; and
• they have provided you with a copy of a statutory booklet called the ‘Debt Advice and Information Package’; and
• you are Apparently Insolvent. Apparent Insolvency is explained above. Your creditors can also prove Apparent Insolvency if you have signed a trust deed which has not become protected or if you have formally advised them in writing that you are unable to pay your debts.

The trustee in a trust deed
If you sign a trust deed and you do not co-operate with your trustee, they have the right to ask the Court to Sequestrate your estate. They have to show that an award of bankruptcy would be in the best interest of your creditors or that you have failed to comply with your obligations under the trust deed.

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If you have decided that you want to apply for Sequestration you must meet all of the following conditions:
• you must owe a total debt of £3,000 or more;
• you must be living in Scotland or have lived in Scotland sometime during the last year;
• you must not have been made bankrupt in the last 5 years, and
• you must pay the application fee.

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It costs £200 to apply for your own Sequestration.

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To apply for your own bankruptcy you must submit an application form along with evidence that you are eligible to apply to The Accountant in Bankruptcy. Debtor application forms are available from insolvency practitioners, money advisers and the Accountant in Bankruptcy (AiB). They can also be downloaded from the AiB website: aib.gov.uk.

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If you are struggling with debt, you should seek advice as soon as possible form a suitably qualified person such as an insolvency practitioner or your local Citizens Advice. Seeking advice and dealing with your debt at an early stage may help you avoid some of the more serious consequences of being in debt. Please call 0141 280 3221 for free, confidential and impartial advice.

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Some employers do not allow people who have been Sequestrated to work for them, most commonly financial institutions. Before you apply for Sequestration you should check the terms of your contract carefully or speak to your employer.

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Yes. It is likely that credit reference agencies will record details of your Sequestration on your credit file for 6 years.

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There are a number of legal restrictions and it is important you check this before applying for Sequestration.

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Not until after you have been discharged.

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Normally no. It is your trustee’s duty to realise the value from your assets, to realise funds with which to repay your creditors. There would not normally be any assets left over at the end of your Sequestration.

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If your creditors are unhappy with the way your trustee has dealt with your Sequestration they can ask The Accountant in Bankruptcy to audit your trustee’s accounts or to investigate a complaint. They may also complain to your trustee’s RPB and apply for direction from a sheriff in a Scottish Court.

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If you are unhappy with your trustee it is very important that you talk to them about your concerns. Your trustee is the person who will decide whether or not you have met your obligations
All trustees must be members of a Recognised Professional Body (RPB) opr be the Accountant in Bankruptcy. Your trustee will give you details of their RPB and you can contact them if you are unhappy with the way your trustee has dealt with your trust deed. Details of a trustee’s RPB should also be on their headed letters.
The Accountant in Bankruptcy has the power of supervision and audit of Sequestrations. The Accountant in Bankruptcy can investigate complaints against trustees and issue a direction to a trustee if she does not believe they have acted appropriately.

You may also apply to a sheriff in a Scottish Court to direct your trustee if you believe they have not acted appropriately. It is recommended that you always obtain legal advice, if you are considering taking court action.

You should raise your concerns with your trustee before you make a complaint.

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Sequestration is legally binding upon you and your trustee is an officer of the Court. If you fail to co-operate there are implications for you.

Failure to co-operate can be a criminal offence, it can lead to your discharge being delayed indefinitely, your employer being asked to deduct your contribution from your earnings and to a Bankruptcy Restriction Order being put in place even after your discharge.

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Normally after 12 months you will be discharged from all the unsecured debts you had at the time your Sequestration was awarded providing your trustee considers that you have met your obligations under the Trust Deed.

These creditors will not be able to pursue money that was owed to them prior to your Sequestration being awarded.

There are some debts that are not written off by Sequestration.
These include:
> fines, penalties, compensation and forfeiture orders imposed by any court;
> debts taken out after your Sequestration was awarded;
> any liability due to fraud including benefit overpayments;
> any obligation to pay aliment;
> student loans; and
> money owed to someone who holds a security on your property, such as a mortgage or secured loan.

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Your trustee will reassess your contribution as and when your circumstances change, for example if you are made redundant a child is born etc. If your income goes up, your trustee will ask you to pay a higher contribution. If your income goes down, your trustee will agree to reduce or completely suspend your payments.

If you acquire new assets within 1 year of your Sequestration being awarded, such as an inheritance, lottery win or significant gift you must inform your trustee and these too must be paid into your Sequestration.

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You can’t.

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The money needed to fund your Sequestration usually comes from two sources, contributions from your income and the sale of things that you own (assets). You will normally be expected to pay a contribution out of your income. Your trustee will advise on how much you should pay after allowing for what you need to live on each month. There will be a standard approach to the calculation of income and expenditure. You will usually be expected to pay a contribution for 48 months.

It is your trustee’s duty to realise the value of your assets for the benefit of your creditors. However, your trustee is required to allow you to keep essential things that you need for your house and family, such as, household appliances and children’s toys.

Your trustee may also agree that you can keep your car if it is of reasonably low value and you have a reasonable need for it. Your most valuable asset is likely to be your home. You will be required to release any equity in your share of your home.

Your trustee will help you to do this and will explore options that avoid selling the house on the open market. They may, for example, allow another family member to buy out your interest or for you to arrange a remortgage. You should discuss this with your trustee but remember that any money tied up in your home will have to be dealt with eventually and your trustee may have to sell your home if you are unable to release the equity in your home.

It is important that you keep up repayments on your mortgage after Sequestration is awarded, because Sequestration will not prevent repossession if you fall behind on your mortgage.

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Your trustee will be paid a fee normally based on the amount of time it takes to administer your Sequestration. Fees will normally be agreed annually by the Accountant ion Bankruptcy. The fee is paid out of the funds the trustee ingathers and before any money is available to repay your creditors.

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As a general rule, creditors will expect you to repay as much as you can afford.

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When setting what you must pay each month to your Sequestration your trustee will normally allow reasonable monthly payment to your pension fund to continue. So long as you don’t cash in your pension during your Sequestration and you haven’t made excessive pension contributions in the lead up to your Sequestration your pension will not be touched.

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So long as your car is not unreasonably expensive or valuable and you need it for work or family reasons then you will normally be able to keep your car, possibly paying extra contributions to your Trust Deed to release the value of your car if it is worth over £3,000.

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Your trustee will work with you to try and avoid this outcome but you will be expected to release all the equity in your home. This may be by obtaining a remortgage, borrowing from family or friends or paying extra contributions. However, if those are not possible or would take too long your trustee may have to sell your home.

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Normally 4 years. Your debts will normally be written off after 12 months but you will be expected to pay what you can reasonably afford from your earnings for 4 years.

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We will only write to your creditors to inform them of your Sequestration. There is no newspaper advert and so long as you co-operate with your trustee your employer will not be contacted. However, your Sequestration will be recorded on the public Register of Insolvencies which is normally scrutinised only by financial organisations but it is a public register.

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No. If you satisfy the requirements to apply for Sequestration it must be awarded and your creditors do not get a choice whether or not to accept your application. Once Sequestration has been awarded your unsecured creditors cannot take any further action against you. Your secured creditors may, however, still take action to take possession of your home if you fall behind with your mortgage payments. Sequestration prevents you from applying for your own bankruptcy or for a Debt Payment Programme under the Debt Arrangement Scheme (DAS).
Sequestration will affect your credit rating and can also prevent you from doing some jobs.

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Applying for Sequestration is a serious step – you must be sure that you understand what you are signing.
Before you apply you should take proper advice, for example from an insolvency practitioner or approved Money Adviser who should give you advice about the consequences of Sequestration and provide information about the alternatives. The alternatives may include a Debt Payment Plan under the Debt Arrangement Scheme, a Debt Management Plan, a Trust Deed or a full and final settlement with your creditors. You should also be given a copy of the Scottish Government’s Debt Advice and Information Package.

You should be aware that the trustee will charge for the work they do and that you can choose who your trustee will be if you are applying for your own Sequestration (you cannot choose if your creditors are petitioning the Court). Your trustee’s fees will be based on the amount of time spent administering your Sequestration and must be approved by the Accountant in Bankruptcy. These fees will be recovered from money ingathered by your trustee during the Sequestration and are not be paid separately.

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Sequestration (also commonly referred to as Bankruptcy) is the second more formal form of personal insolvency in Scotland. When your estate is Sequestrated your rights to the things that you own (assets) are transferred to a trustee who can sell them to pay your creditors.

Sequestration will normally include a contribution from your income for a set period; normally 48 months

Your Sequestration will be administered by a trustee who either must be a qualified insolvency practitioner or the Accountant in Bankruptcy.

Insolvency practitioners are regulated by law and must be members of an approved governing body.

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