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A complete guide to Sequestration?


A complete guide to Sequestration?

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Often described as ‘Scottish Bankruptcy’, Sequestration is an insolvency solution in Scotland for those who are struggling to pay their debts. It involves a Trustee gaining control of your assets for 12 months and managing your finances for up to 4 years in order to pay back your creditors. After this, your debts would be written off.


If you have debts over £3000, have lived in Scotland within the last 12 months or have a place of Business in Scotland and have not made yourself bankrupt in the last 5 years, then you or your creditors could apply to the Accountant in Bankruptcy (AiB) for sequestration. If you choose sequestration, you must complete an application form and send it to the AiB along with an application fee of £200.

If your sequestration is approved, you are given a Trustee who will gain control of your assets and, if appropriate, release their equity in order to pay your creditors. Equity is the real value of an asset to its owner, taking into consideration any secured debts and costs associated with selling the asset. For example, your Trustee may sell your home, if you own it and have a significant amount of equity on it or a car with equity over £3000.

Your Trustee will also manage a payment schedule over a four year period based on your income and expenditure. Your disposable income, after essential expenditure, is calculated and you are required to pay this to your Trustee who distributes it among your creditors. This payment plan is reviewed every year and, therefore, the amount you must pay could go up as well as down, depending on any changes in your circumstances.

Providing you have fully cooperated with your Trustee, you are discharged from Sequestration after 12 months, but may have 3 more years of monthly payments. A Trustee can also claim newly acquired assets for your creditors, such as inheritance, over those 4 years.

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  • Your creditors cannot reject Sequestration if it is approved
  • Monthly payments are based on your real income and expenditure
  • Your interest, fees and charges on your loans are frozen so your debt cannot grow before it is written off
  • Creditors are not able to take legal action against you while you are sequestrated. They are also not allowed to contact you
  • As most debts are included in sequestration, all your debt is likely to be written off. This means that, as long as you completely comply with your Trustee, you could have a completely fresh start


  • It is likely that, if you have assets of value, they will be sold
  • Any assets gained over the four year ‘acquirenda term’, such as inheritance, may also be claimed by your Trustee to be sold
  • Your employment can be affected, particularly if you are a director of a limited company. It is advised that you discuss this with a lawyer
  • Similarly, leases, employment contracts, mortgages, Hire-Purchase agreements and other legal documents could include clauses restricting you from bankruptcy. It is important to check and seek legal advice
  • You are likely to have to commit to four years of repayments.
  • There is a £200 application fee
  • Your credit rating will be negatively impacted
  • Some debts are not included in Sequestration, such as student loans