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20.04.2018

Bankruptcy in Scotland

Many aspects of the legal system in Scotland are unique from the rest of the UK. Sequestration, which is often described as ‘Scottish Bankruptcy’ is one example of this. ‘Sequestrating’ means taking legal control of assets and is an option for those who are finding it difficult to pay their debts. A Trustee takes control of your assets for twelve months, and manages your finances to repay as much debt as is possible over a four year period. While it is unlikely that you will have the choice between Sequestration and Bankruptcy, occasionally someone who has recently moved from Scotland to England or Wales, or who has a business in Scotland while living in England or Wales, could be eligible for either.

Similarities with Bankruptcy

There are a number of similarities between Sequestration and Bankruptcy in England and Wales:

  • The Trustee has a similar role as an ‘Official Receiver’, who takes control of your assets and manages your finances in order to repay your debts
  • Both stop creditors from contacting you or taking legal action against you. They must contact your Trustee or Official Receiver
  • Most, if not all, of your debts are written off after both processes are complete. This could allow you to have a financial fresh start
  • Both are discharged after 12 months. This means you officially regain control of your assets after this time. However, with both, you may still have repayments and newly gained assets may be claimed by your Trustee or Official Receiver
  • If you own a home with significant equity, it is quite likely that the Trustee or Official Receiver will release its equity, often through selling it
  • Similarly, cars with a lot of value are likely to be required to be traded in, or sold, in both debt solutions

Differences from Bankruptcy

Although they appear very similar, there are plenty of differences between Bankruptcy and Sequestration:

  • Sequestration has an extra year of repayments. If your surplus income is deemed significant enough to allow repayments, you usually need to make these payments over four years, while with Bankruptcy this is only three years
  • In order to be eligible for Sequestration, there is a smaller minimum debt of £3000, whereas with Bankruptcy it is £5000. This could be good for those who wish to choose to enter into sequestration. However, your creditors can also pursue sequestration and the lower eligibility makes it easier for them
  • The application fee for Sequestration is smaller than the fee to enter into Bankruptcy. Sequestration will cost you £200, Bankruptcy is as much as £680
  • In Scotland, you apply to the Accountants in Bankruptcy (AiB), rather than the Insolvency Service who deal with Bankruptcies in England and Wales
  • The threshold for keeping your car is higher with Sequestration. You can keep your car if it is worth less than £3000 in Scotland. However, with Bankruptcy, it must be less than £1000