Frequently asked questions about sequestration

Got a question about Sequestration?

PayPlan have put together the below list of frequently asked questions, so hopefully you’ll find your answers here.

If your question isn’t listed – or if you would like further advice about sequestration (or any other debt solutions), don’t hesitate to get in touch with our experienced debt advisers.

Our freephone number is 0800 280 2816.

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  1. What is sequestration?
  2. How does sequestration differ from bankruptcy?
  3. Will my employer be told about my sequestration?
  4. Will I have to sell my house in sequestration?
  5. What debts can be included in sequestration?
  6. My dishwasher is on hire purchase – what will happen to it in sequestration?
  7. How much does it cost to file for sequestration?
  8. Who initiates sequestration proceedings?
  9. Why do I have to prove I am apparently insolvent to apply for sequestration?
  10. Why do I need a Certificate of Sequestration?
  11. My car is on finance, will it get repossessed in sequestration?
  12. Who is the Accountant in Bankruptcy?
  13. How long does sequestration take?
  14. How long does sequestration last?
  15. What is the Register of Insolvencies?
  16. What happens to my creditors after I enter sequestration?
  17. Can I borrow money after being in sequestration?
  18. What happens if I receive inheritance after entering sequestration?
  19. How will sequestration affect my credit rating?

  1. What is sequestration?
Sequestration is a debt solution available to residents of Scotland. It is the Scottish version of bankruptcy and it involves selling your assets and making income contributions (where possible) in order to repay your debts.

For more information, visit our sequestration page.  
  1. How does sequestration differ from bankruptcy?
Sequestration is the Scottish equivalent of bankruptcy.

Sequestration is only available to residents of Scotland, and bankruptcy is only available to residents of England, Wales and Northern Ireland.  
  1. Will my employer be told about my sequestration?
Your employer will not be told directly about your sequestration.

However, for some jobs, the employment contract may state that you can’t continue in your role if you are made bankrupt. So, it is recommended that you check your employment contract – or speak to your HR Department – before proceeding with sequestration.

Also, all sequestrations are entered on the Register of Insolvencies, which is a public register. This means there could be a possibility that your employer could find out.

If you are the director of a limited company, you will not be able to continue in this role if you enter sequestration.  
  1. Will I have to sell my house in sequestration?
If you have equity in your property, your Trustee will ask you to realise (release) this equity for the benefit of your creditors.

This does not definitely mean that you will have to sell your home. It may be possible to pay the Trustee your equity through re-mortgaging, introducing a third party contribution, or via the mortgage-to-rent scheme.

If you have negative equity – or a very low amount of equity – this may not be an issue, as there will be no equity available once all the legal fees are paid.

As every individual circumstance is different, we would always discuss how your home might be treated in sequestration before you apply.
  1. What debts can be included in sequestration?
All your unsecured debts can be included in sequestration – such as credit cards, loans, utility arrears etc.

Secured debts – such as mortgages and hire purchase – are generally not included, along with student loans, court fines, and any debts incurred through fraud or fraudulent activity.  
  1. My dishwasher is on hire purchase – what will happen to it in sequestration?
You will need to ensure that your finance provider is happy for you to keep the item, despite you entering sequestration.

As every company is different, some companies will not allow you to keep the item when entering an insolvency plan, whereas others will allow you to.  
  1. How much does it cost to file for sequestration?
In order to apply for sequestration, you must pay an upfront application fee of £200. You should pay this to the Accountant In Bankruptcy.
  1. Who initiates sequestration proceedings?

There are 3 parties that can start sequestration proceedings:

  • You: If you believe sequestration is the best option for you – after seeking advice from a money adviser, and ensuring you meet the criteria for sequestration – you can complete the Debtor Application Pack, pay the £200 fee, and enter sequestration.
  • A creditor: If a creditor (or group of creditors) to whom you owe over £3,000 in total has sent you a charge for payment which has expired or a statutory demand, they will be able to petition for your sequestration through the courts. If they do this, they will have to cover the Accountant In Bankruptcy’s initial administration fee of £200.
  • A Trustee of a Trust Deed: If you are in a Trust Deed, and don’t co-operate with the Trustee, they can petition for your sequestration if they believe it is in your creditor(s’) best interests.
 
  1. Why do I have to prove I am ‘apparently insolvent’ to apply for sequestration?
    As sequestration is an insolvency solution, you are required to prove that you are ‘apparently insolvent’ by demonstrating that you cannot afford to repay your debts as they fall due. There are several different ways to prove this, including:
    • A failed Protected Trust Deed
    • An expired statutory demand
    • A Summary Warrant
    • A Certificate of Sequestration – you can get this from an Insolvency Practitioner (IP), or a money adviser.
  1. Why do I need a Certificate of Sequestration?
Your Certificate shows that you are insolvent, and can’t repay your debts. You need one in order to file for sequestration. PayPlan will be able to provide you with a Certificate of Sequestration.
  1. My car is on finance, will it get repossessed in sequestration?
Check your finance agreement to see if it contains a clause stating that the lender will repossess the vehicle in the event of your insolvency.

Some companies will allow you to keep the vehicle when entering an insolvency solution like sequestration, whereas others will not.

You will also need to discuss with your Trustee whether they will allow you to keep on making repayments to the Hire Purchase during your sequestration.  
  1. Who is the Accountant in Bankruptcy?
The Accountant in Bankruptcy is a department of the Scottish Government.

They oversee all insolvency solutions (including sequestration) and the Debt Arrangement Scheme (DAS) in Scotland. They approve sequestration applications, and will act as Trustee in Sequestration, if no other Trustee is appointed.  
  1. How long does sequestration take?
The timeframe to set up a sequestration varies depending on your individual circumstances.

However, on average, it will take between 2-4 weeks to set it up. Our associated company PayPlan Scotland Limited will always look to ensure your sequestration is set up as quickly as possible for you.

As soon as they have all the necessary information, they will forward your application – along with the £200 fee – to the Accountant In Bankruptcy for approval.  
  1. How long does sequestration last?
Sequestration itself lasts for a year. However, you may be required to make a contribution from your income for a period of four years, but only if you can afford to do so.
  1. What is the Register of Insolvencies?
This is a public register where all insolvency plans are recorded, including sequestration and Trust Deeds. It is public, and therefore searchable by anyone.  
  1. What happens to my creditors after being in sequestration?
Once your application for sequestration has been approved, you won’t be dealing with your creditors directly anymore. They won’t be able to take any legal action against you, or chase you for payments.

You will make any necessary payments to your Trustee (typically the AIB or an Insolvency Practitioner (IP)), and they will deal with all creditor correspondence on your behalf.  
  1. Can I borrow money after being in sequestration?
You are only able to borrow up to £2,000 before you have to tell your lender that you have been in sequestration.

It is likely any borrowings will come with a high interest rate – due to your sequestration and your adversely affected credit rating.  
  1. What happens if I receive inheritance after entering sequestration?
If you receive any inheritance during the 4 years that you are in sequestration, this will need to be paid to your creditors.

Similarly, any other windfalls that you receive within this time will also need to be paid to your creditors.
  1. How will sequestration affect my credit rating?
Sequestration will show on your credit file with the credit reference agencies for a period of 6 years. This will naturally make obtaining credit more difficult.