Sequestration is the Scottish term for bankruptcy and is a legal process. As a remedy, a creditor may wish to take advantage of the sequestration process provided their debt exceeds £3,000 subject to establishing apparent insolvency, or an individual may lodge their own application for sequestration with the Accountant in Bankruptcy provided their debts exceed £1,500 and they fulfil apparent insolvency requirements.
Once sequestration has been granted by the Court, or the Accountant in Bankruptcy, a Trustee is appointed to manage the individual's financial affairs; interest and charges in relation to the debt will be frozen at the date the sequestration takes effect.
What happens in sequestration:
- Control of any assets passes to the appointed Trustee
- Property and other valuable assets may be sold
- If payments from income can be made, these will be made monthly for up to three years
- Notice of the sequestration is published
- Whilst sequestrated it is necessary to disclose the sequestration to a lender if sequestrated party wishes to obtain any credit greater than £500
- Discharge from sequestration will usually take place after one year, although the Trustee may remain in office for three years or more
- When discharged the debtor is free from any restrictions imposed by the sequestration
- The Trustee can still realise any asset in which the sequestrated estate has an interest, even after the debtor's discharge
Certain debts, such as student loans and court fines are not covered by the sequestration and will remain due and payable.
Sequestration as a remedy carries with it certain restrictions which may affect the debtor such as continuing to be a company director, practice as a lawyer or accountant amongst others.