Sequestration Pros & Cons
When choosing a debt solution, you should always consider the advantages & disadvantages to ensure you select the debt solution that’s right for you.
We’ve put together a list of pros & cons below, so you can get a better idea of what happens during sequestration.
If you want to discuss this debt solution – or if you want advice about all the options that are available to you -call PayPlan FREE on 0800 280 2816 or complete and submit the form on the right to request a callback from our experienced debt advisers.
Advantages of sequestration
- It’s quick and easy to set up
It is fairly easy to complete the forms, pay the £200 fee and apply for sequestration. You will be discharged from sequestration after just a year – which is normally much quicker than a Debt Arrangement Scheme (DAS), Debt Management Plan (DMP) or Trust Deed.
- Income payments
- Frozen interest and charges
You don’t have to worry about your debts increasing – as creditors are legally obliged to freeze interest & charges.
- Peace of mind
Once you are discharged from sequestration, the balance of your debts will be written-off.
- Legal action is stopped
Once you have entered into sequestration, your creditors cannot take any further legal action against you.
- New start
In sequestration, your debts can be written off, helping you to become debt-free.
Disadvantages of sequestration
- Credit rating
As with any arrangement where you make reduced payments to your creditors (and/or have debts written-off), your credit rating will be adversely affected. Sequestration will show on your credit file for 6 years from the start of your sequestration.
Any assets of value – including your home and car – may be sold to repay your debts.
- Register of Insolvencies
Your sequestration will be recorded on the publicly available Register of Insolvencies.
Any unexpected lump sums – such as a lottery win or an inheritance – must be paid into your sequestration. If the windfall is enough to repay all your creditors in full, plus the sequestration fee and any statutory interest, you will have to pay all this into your sequestration.
- Annual reviews
Your income & expenditure will be reviewed annually to assess whether you can afford to make contribution payments into your sequestration.
Sequestration could affect your job – but usually only if you work in the financial services industry. Before you apply for sequestration, you’ll need to check the terms & conditions of your employment to see if it will affect your job. If you are in any doubt, it is always best to check with your employer. You can also not act as a Director of a Limited Company for the duration of your sequestration.
- No further credit
You cannot obtain any further credit of more than £2,000 without telling the lender that you are in sequestration. As your credit rating will be affected, it is also unlikely that you will be able to obtain any credit without paying a higher than average interest rate.
- Debts taken out after sequestration
Only debts that were included in the original sequestration will be discharged at the end of your sequestration – so if you take out any further borrowing or loans after this, it won’t be included in your sequestration and you’ll still have to repay this in the normal way.
- Bankruptcy Restrictions Order
If you do not co-operate with the Trustee – or if you have been dishonest or guilty of “unfit conduct” – then your sequestration could be extended for up to 15 years. During this period you would still be subject to all the restrictions of sequestration.
If you are struggling to pay your debts, get in touch with PayPlan. All our advice is FREE, and we can advise you on all the debt solution options that might be available to you.
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