In 2008 the laws relating to Scottish Bankruptcy were changed. Previously many people used to wait until a creditor decided to make them bankrupt, but many creditors decided some sums were simply not worth recovering, which left thousands of people just watching their debts rise through interest rates and charges. The new legislation introduced in 2008 made it easier for debtors to take control of their finances and sequestrate themselves.

Sequestration

To be eligible for Sequestration you have to meet certain criteria. You must:

 

  • Have lived in Scotland for 1 day, although extra evidence may be requested to prove that you intend to stay in the country
  • Owe more than £1,500
  • Not have been sequestrated in the last five years and earlier
  • Be classed as apparently insolvent, which could mean a creditor has issued a statory demand or a charge for payment, or:
    • You were not able to get your Trust Deed protected (by signing the paperwork for this you have declared yourself insolvent), or;
    • Obtained a Certificate of Sequestration

 

You can get a Certificate Of Sequestration from an Insolvency Practioner once they have looked over your finances and deemed you can no longer pay your creditors and request sequestration. A Money Advisor is also able to issue you with a Certificate Of Sequestration but only if they are on the government list of approved advisors.

 

Once you have your certificate, then within 30 days you simply apply for your sequestration to the Accountant in Bankruptcy (AiB).There is a £200 fee for applying for sequestration.  If your application is submitted with the correct evidence and your fee, the AiB will try to process the application within 5 working days, so you could  be declared formally bankrupt within 5 working days of them receiving your application and a Trustee will be appointed over your affairs.

 

At this point the Trustee who may be an Insolvency Practioner or the Accountants In Bankruptcy, assesses your assets to see if any can be sold to release some cash to your creditors, and also assesses your income and expenditure to see if you can afford to make any payment to your creditors. Tne Account In Bankruptcy is what is known as the default Trustee, which means if you don't want to go and find an IP yourself to act as Trustee they are appointed to deal with your affairs.

 

Within 60 days of you being sequestrated, all of your creditors will be told by your IP about your sequestration, however from the date of your order you will never have to deal with them again. They may ring or write to you, but all you do is pass them over to your IP. You don’t have to tell them anything and don’t have to get drawn in to any conversations with them. It can take time for creditors to react to notices from your IP, especially if your debt is being pursued by agents or other organisations but eventually your IP will take care of all the creditors and ensure that you are in a position so you can start again.

 

Twelve months from the date you were granted your Award of Bankruptcy you will should be discharged from the arrangement. If you need a certificate to show that you have been discharged, you can apply to the Accountant In Bankruptcy on payment of a small fee (£11 at the time of writing). However, that doesn’t mean the work of your Trustee is complete – depending how complex your case is, their work may continue in the background. You will have to cooperate with your Trustee and you may receive a letter from your Trustee keeping you up to date with what is happening, but you are free to begin to rebuild your life and your credit rating as soon as possible.


If you are able to afford them, you will be required to make payments towards your debts from your income for 36 months.  Although you are discharged from bankruptcy after 12 months you will continue to make your payments as long as you can afford them until the 36 months are completed.

LILA (Low Income, Low Asset)

LILA stands for; Low Income, Low Asset Sequestration. This is just another way you may be able to apply for Sequestration.


To meet the LILA Sequestration criteria you must:

 

  • Have lived in Scotland for 1 day, although extra evidence may be requested to prove that you intend to stay in the country
  • Owe more than £1,500
  • Earn the National Minimum Wage or less for a 40 hour working week
  • Have no more than £10,000 in assets, with none individually worth more than £1,000
  • Own no land or property

 

You do not have to be apparently insolvent to obtain a certificate of sequestration.

 

You will still be classed as low income if you receive income-based jobseeker’s allowance or working tax credits. Social security benefits or other tax credits are likewise not included. Maintenance payments and pensions however are. If you meet the LILA criteria then you apply to the Accountant in Bankruptcy in the same way by getting an Insolvency Practioner or a Monay Advisor to look over your finances and confirm that you mee the criteria as outlined above. You have to complete an aplication form downloadable from the AiB website, or which you can get from an IP or Money Advisor. There is a £200 application fee.

 

At this point the Trustee, who may be an Insolvency Practitioner or the Accountant in Bankruptcy, assesses your assets to see if any can be sold to release some cash to your creditors, and also assesses your income and expenditure to see if you can afford to make any payments to your creditors.  The Accountant in Bankruptcy is what is known as the default Trustee, which means if you don’t want to go and find an IP yourself to act as Trustee, they are appointed to deal with your affairs.

 

Within 60 days of you being sequestrated, all of your creditors will be told by your IP about your sequestration, however from the date of your order you will never have to deal with them again. They may ring or write to you, but all you do is pass them over to your IP. You don’t have to tell them anything and don’t have to get drawn in to any conversations with them.

 

It can take time for creditors to react to notices from your IP, especially if your debt is being pursued by agents or other organisations, , but eventually your IP will take care of all the creditors and ensure that you are in a position so you can start again.Twelve months from the date you were granted your Award of Bankruptcy you should be discharged from the arrangement. If you need a certificate to show that you have been discharged, you can apply to the Accountant In Bankruptcy on payment of a small fee (£11 at the time of writing).  However, that doesn’t mean the work of your Trustee is complete – depending how complex your case is, their work may continue in the background. You will have to cooperate with your Trustee and you may receive a letter from your Trustee keeping you up to date with what is happening, but you are free to begin to rebuild your life and your credit rating as soon as possible.

 

For more information and to talk to someone in confidence about Sequestration, call one of our specialist advisers now on 0141 345 2904.

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Write Off Unaffordable Debts

In most circumstances an award of Bankruptcy will allow you to write off most of what you cannot afford to repay, i.e. liabilties such as unsecured loans and credit card debts will be dealt with by your Trustee. Note: There are some debts that cannot be written off. Click here* for more information on the limitations.
 

Free From Debt Pressures

Unlike a Trust Deed Scotland, Sequestration can make you totally free from provable debts, although you will have to make a contribution from your income for 3 years if you can afford to. Your Trustee takes over dealing with your creditors and you will be totally debt free subject to some limitations depending on your circumstances.
 

Government Legislation

A Sequestration is under the control of the Scottish Government and is intended to help people who are struggling wither finances. An award of Bankruptcy is not a debt management plan or IVA, meaning there are no regular monthly repayments to make, if you have no surplus income after meeting your normal monthly outgoings.

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