The Good And The Bad Of Sequestration In Scotland
Sequestration offers a fast and straightforward solution to Scottish bankruptcy, and it is available to debtors who owe as little as £1,500. The advantages this process offers to those unable to pay their bills is that it can put an end to harassment from creditors, and your debt will be written off once the process has ended. There are disadvantages to the process as well, however, and understanding both the pros and the cons can help determine if sequestration is the right choice for you.
What Is Sequestration?
Sequestration is for all intents and purposes the declaring of bankruptcy, and the act can be either voluntary or initiated by your creditors. In either case, the proof of your insolvency is the key, which simply means proving that you cannot pay the money you owe to your creditors. The process is straightforward in both instances, however, with the basics steps including:
- For those filing for sequestration themselves, financial documentation is presented to the Accountants in Bankruptcy as proof of insolvency, who will then present the documentation to the Sheriff Court. An Insolvency Practitioner will then be assigned to gather and sell your assets, with the revenue divided between your creditors and the fees owed to the AiB. Discharge from the sequestration is granted 12 months from the date your insolvency is confirmed by the AiB
- For those sequestered by their creditors, a Demand for Payment will be sent first, and a petition for sequestering will be filed with the Sheriff Court only after the payment is not made. The remaining steps then follow the same procedure as voluntary sequestering, with an Insolvency Practitioner being appointed and assets then being gathered and sold. The differences are that a Warrant to Cite may be issued to make an appearance in court necessary, and discharge occurs 12 months after the issuing of the Warrant
What Are The Advantages Of Sequestration?
Whether the sequestration is done voluntarily or through the actions of your creditors, there are some definite advantages to the choosing this process. What sequestration can offer those unable to pay their bills include:
- Your remaining debt is written off once your assets are sold and the revenue distributed, leaving you debt-free once the process is over
- Your creditors are prohibited from contacting you or taking any additional actions against you in an attempt to recover their debt, which eliminates both the pressure and harassment often experienced when dealing with creditors
- The exemption of assets such as clothing, furniture, educational tools, or work-related items, meaning that they cannot be taken by the Insolvency Practitioner
- A fast legal process, as both the creditors and the court work to resolve the issue of debt as quickly as possible
- The ability to opt for sequestration even if your debts are as little as £1,500
Are There Disadvantages To Sequestration?
Unfortunately, there are some drawbacks to filing for sequestration that can make it difficult to recover once the process has ended. The fact that your assets will be lost is the most obvious disadvantage, particularly since this can include your home and your vehicle, but the repercussions can extend beyond the loss or property. The further drawbacks include:
- The inability to obtain credit for more than £250 until your sequestration is discharged.
- Damage to your credit rating. Sequestration will appear on your credit record for a period of three years, which may significantly lower your credit score.
- The public advertisement of your sequestering, which can damage your reputation and make it difficult to obtain credit in the future
- The loss of your job if your duties require financial responsibility. This is because some employers close these positions to those who have been sequestered, which can render even current employees ineligible. You may also be ineligible for promotion into management due to sequestration
Sequestration can nevertheless be an effective answer to the issue of Scottish bankruptcy, as it can enable you to rebuild your life from a debt-free standpoint in as little as 12 months. Even if you are not a Scottish citizen, you may still be eligible to apply, provided you have lived in Scotland for at least five years, and have not filed for sequestration for the previous five years. The Accountants in Bankruptcy website provides all of the necessary forms online, along with additional information to ensure you have the information you need before filing. Sequestration may involve some short-term disadvantages, but the long-term rewards make it an option worth considering.