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Sequestration from creditors

If you owe more than £3000 to a creditor, they can apply to make you bankrupt, which is known in Scotland as sequestration.

Two or more creditors can petition together if their total debts add up to more than £3000.

A creditor must first show you cannot pay your debts and are ‘apparently insolvent’. They issue one of the following documents to prove this:

A ‘charge for payment’, giving you 14 days to pay the debt
A ‘statutory demand’ giving you 21 days to make payment

If you do not pay or come to a satisfactory arrangement within the timescale, the creditor can then begin sequestration.

The sheriff’s court will grant an order called a ‘warrant to cite’ which gives a date for a court hearing.

You can go to the hearing and explain why the court should not award sequestration, for example if you can raise the funds to repay the debt. If this is unsuccessful or you do not to go to the hearing, the sheriff will usually award sequestration automatically.

Sequestration can dramatically affect your situation. You could lose your home, car and other assets. If you are worried that a creditor is going to apply for sequestration, we recommend you call us for further advice.

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FAQs

What assets am I likely to lose in sequestration?

You are likely to lose any non-essential items of value. This includes your home, your car (unless it is needed for work) and any luxury items, such as jewellery, antiques. You will also lose any funds held in savings, shares or life policies.

You will not normally lose any normal household goods such as furniture, bedding, clothing and kitchenware. Items you need in order to work, such as a car, tools or books, will normally not be included in sequestration as long as their value does not exceed £1000.

Will I lose my home following sequestration?

If you own your home and you have equity, the property may be sold. This can happen even if the house is jointly owned. You will be given enough time to find alternative accommodation. If there is little or no equity, you may be able to keep the house.

If you live in private rented property, there may be a condition in your tenancy agreement saying you will lose the house if you are bankrupt. You should check this before considering sequestration. You may find it more difficult to rent another property after sequestration.

Other debt solutions may be more appropriate and allow you to keep your property. If you would like to know if sequestration is the right solution for you please use our online counselling service or call our free Helpline on 0800 138 1111.

Do I have to make any payments to my debts after sequestration?

If you have money available each month after all your living expenses, you may have to make payments towards your debts after sequestration. This is called an ‘income payment agreement’. Any payments will be based on an amount you can afford and will last for three years.

What will happen to my pension after sequestration?

In almost all cases, money held in a pension fund is safe and will not be taken into account as an asset in sequestration. This means you will not lose your pension, although you may have to stop paying into it until you are discharged from sequestration.