Sequestration Detail

What are the implications of being sequestrated?

The principal effect of sequestration is that your estate must be handed over to a Court appointed Trustee. The Trustee is appointed to realise your estate for the benefit of your creditors. If applicable, you will be expected to contribute any surplus income generated from your employment over the period of sequestration, which will be a minimum of 1 year.

When the Trustee has realised your estate, and provided that you have complied with any request to contribute surplus income, your Trustee will settle the fees and expenses of the sequestration process, pay any surplus funds as a dividend to your creditors and apply to be discharged as your Trustee. Provided that you comply with your Trustee’s requests, sequestration will last for one year and you will be automatically discharged on the one anniversary of the commencement of sequestration.

What is apparent insolvency?

Apparent insolvency means that you are unable to pay your debts, and that at least one of your creditors has taken legal action against you. Generally, this means at least one of the
following will apply:

• Having obtained a decree in respect of a debt due to them, one of your creditors has served a Charge for Payment of the debt and you have failed to make payment within the 14 days allowed by the charge;
• One of your creditors has served a statutory demand for payment and you have not paid the sum due within the 21-day time limit allowed by the demand.

Peace of mind

Our focus is on providing positive solutions to your financial problems.

Before sequestration is recommended, we will analyse your financial affairs and discuss with you any possible alternative courses of action to resolve your financial problems. In addition, we will explain how your assets will be realised and what your obligations are. We will also explain simply and clearly the practical implications of sequestration. We can also assist you in completing the appropriate form, and in having it presented to Court.

Your home

The only interest the Trustee is likely to take in your home is in respect of your share of any available equity. A valuation of the property will be carried out and the level of any outstanding mortgage/secured loans established. Equity is the difference between the property valuation and the outstanding debts secured on the property. Once the value of your share of the equity has been calculated, arrangements will need to be made for this sum to be paid to your Trustee. If agreement cannot be reached voluntarily, your Trustee has power to raise a Court action to compel the property to be sold.

Your car

The Trustee’s interest will only be in any equity which exists in the car. If the car is subject to hire purchase, this will be taken into consideration when determining any available equity.
If your car is required to travel to and from work and you make a monthly contribution to the Trustee from your income, you may be allowed to retain the car. If your car is not required for this purpose, or if significant value could be realised from its sale, your Trustee may require the car to be sold. He may, however, allow you sufficient funds to buy a car of lower value for your continued use.

Any other assets

You will normally be able to retain household goods required for every-day use. If applicable, you will be able to retain any tools that you need for your trade (up to the value of £1,000). Other assets will be looked at individually, and may be sold depending on their value and purpose.

Protection from creditors

Following sequestration your creditors cannot take any recovery action in respect of debts owed prior to the commencement of sequestration. Subject to a few minor exceptions (e.g. Student Loans), you will not be required to make any further payments in respect of these debts once you have been discharged.

Fees and costs

You will only have to pay the Accountant in Bankruptcy's adminstration fee (currently £100) for your sequestration application. Asset realisations from your estate, together with any contributions from income, will fund the Trustee’s fees and expenses, and will be deducted prior to any dividend pay¬ment to creditors.

Sequestration recall

In certain circumstances where sequestration could have been avoided, it can subsequently be recalled by presenting a petition to the local sherrif court (or the court of session in Edinburgh if your sequestration pre dates 1st April 2008). The recall process is fairly expensive and complex and, if you think you should not have been sequestrated, you should take immediate legal advice.

The principal advantages of sequestration are:

• Your creditors will no longer be able to pursue you or take action against you to recover what you owe
• You will not have to make further payments to your creditors
• You may expect to be discharged after one year and will then be free of debt.

There are, however, some disadvantages:

• If you own any valuable assets, including endowment policies, these will usually have to be realised
• If you are in paid employment you may have to make a regular contribution
• If you acquire any money or property after the date of your sequestration and before the date of your discharge, you will have to surrender these to your Trustee
• It is unlawful to incur credit of more than £500 whilst sequestrated, unless you tell the lender that you are an undischarged bankrupt
• You are not allowed to start up or be involved in the day-to-day management of a limited company
• You are not allowed to act as a member of parliament, and there are certain other restrictions, such as acting as a member of any local council or school boards, etc
• Your sequestration will be advertised in the Edinburgh Gazette and may be noted by credit referencing agencies.
• You may have difficulties in obtaining credit after your discharge