Life after sequestration (bankruptcy) in Scotland

Sequestration is the name used for bankruptcy in Scotland. It’s a major step to take, and anyone considering sequestration needs to be fully aware of all the consequences of opting for this as a debt solution.

For people with really serious debt problems, sequestration does offer some very clear advantages – when you are awarded sequestration, pressure from creditors goes away, as they cannot take any further action against you to recover the money you owe them; you only have to make payments into your sequestration if you can afford to do so; your debts are written off in full when you are discharged from sequestration (normally after just 12 months); and you’re allowed to keep reasonable assets, including essential household items and tools needed for work.

However, here are some of the main things you need to bear in mind if you are thinking about whether sequestration is the right debt solution for you:

Your home may be sold

If you have any spare equity in your home, or if you own it outright, the Trustee will expect this value to be used towards paying off your creditors. In reality, this may well mean your house will need to be sold, unless a friend or family member can raise the equivalent sum and give it to the Trustee.

You may have to downsize or downgrade your car

If you have a car that’s worth more than £3,000, you may have to sell it and buy a cheaper one, with the excess funds over £3,000 going towards paying off your creditors.

Your credit rating will be affected

Details about your sequestration will remain on your credit history for six years, making it difficult for you to obtain further credit during this time. Even after the six years have elapsed, lenders may ask you if you have ever been bankrupt, so it may still be difficult for you to obtain significant amounts of credit, e.g. a mortgage or secured loan.

People may find out

The regulations surrounding the publishing of sequestration information were changed in 2009, so it is now unlikely that your details will appear in the local newspaper. However, your name will still be added to the Insolvency Register which is accessible to anyone via the internet – anyone searching this online register will be able to see details of your sequestration.

You may still have to make payments for three years

Whilst you will probably be discharged from sequestration after 12 months, if you are in paid employment you may be required to make payments into your sequestration for up to three years. And if your income increases during this period, your payment amounts will increase too.

Your job could be at risk

Whilst not all jobs are affected by the jobholder being in sequestration, your job could be at risk if you hold any public office (e.g. MP, MSP, councillor or school board member) or if you are a company director, or if your profession has a rule preventing you from practising whilst in sequestration (e.g. solicitor, accountant, etc.) Whatever job you do, it’s important to check your employment contract to see if it contains any clauses about sequestration or bankruptcy, which is possible if your job involves handling money or being in a position of trust.

You may have to pre-pay for utilities

Your utility suppliers may stipulate that you have to pre-pay for their goods and services (for example by using a pre-payment meter for electricity and gas) or by paying a deposit up front for other utilities like phone, mobile phone, broadband and water.

You’ll still be liable for Council Tax

Whilst any Council Tax arrears due at the date of sequestration will be included as debts in the sequestration (and ultimately written off on your discharge), you will still be liable for all present and future Council Tax payments which become due, both during and after sequestration.

You’ll have to forfeit any inheritance or other windfalls

If you receive any inheritance of property or money between the date of your sequestration and the date of your discharge, you’ll have to surrender this to the Trustee for distribution amongst your creditors. The same goes for any other windfalls, like lottery winnings.

If you live in Scotland and are looking for a solution to your debt problems, sequestration could be the right route for you to take, but there are lots of other potential solutions out there too – find out more about all the available options and start narrowing down your choices today.

This entry was posted on Wednesday, July 4th, 2012 at 10:03 am and is filed under News . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.