Sequestration is Scotland’s version of personal bankruptcy. It follows broadly similar principles to the bankruptcy process in England and Wales — most unsecured debts are written off, the process is usually completed within 12 months, and it is administered by a licensed insolvency practitioner or the Accountant in Bankruptcy (AiB). But there are important Scottish-specific differences in eligibility, process, and the treatment of assets.
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How Sequestration Works
Sequestration freezes all creditor action, transfers control of your estate (assets) to a trustee, and provides for discharge — the legal writing off of qualifying debts — after 12 months if your circumstances have not improved.
The Sequestration Process
| Stage | What happens |
|---|---|
| Certificate from money adviser | A regulated adviser confirms you cannot repay your debts — required before applying |
| Application to AiB | You apply online, pay the £200 fee |
| AiB awards sequestration | Usually within a few working days |
| Trustee appointed | AiB or a private insolvency practitioner manages your estate |
| 12-month administration | Assets assessed, income contributions assessed, creditor claims submitted |
| Discharge | Remaining qualifying debts written off — usually automatic at 12 months |
Eligibility Criteria
| Criterion | Requirement |
|---|---|
| Minimum debt level | £3,000 |
| Residence | Habitually resident in Scotland, or business/property there |
| Ability to pay | Must demonstrate inability to pay debts as they fall due |
| Previous insolvency | Must not have been sequestrated in the past 5 years |
| Certificate required | From an approved money adviser (free charities, licensed advisers) |
What Happens to Your Assets
Your trustee takes control of all assets that form your “estate.” In sequestration, the trustee can realise assets to pay creditors.
| Asset | Treatment |
|---|---|
| Home (owned, with equity) | Trustee may sell or claim equity — this is often the most significant risk |
| Car (over reasonable value threshold) | May be claimed if value exceeds what is needed for work |
| Essential household items | Protected — cannot be claimed |
| Pension (uncrystallised) | Generally protected from the estate |
| Cash and savings | Can be claimed by trustee |
If you own a home with equity, sequestration carries a real risk of losing it. A Protected Trust Deed may be a more appropriate route if preserving the home is the priority.
Income Contributions — The Debtor Contribution Order
If your income exceeds a reasonable threshold for living expenses, the trustee can require you to make monthly payments under a Debtor Contribution Order (DCO). These continue for up to 48 months (4 years). The contribution is based on what you can afford after essential living costs.
This is different from the 3-year income payment period in English bankruptcy, and means sequestration can have income obligations lasting longer than the 12-month discharge period.
After Discharge
Discharge is automatic after 12 months (unless the trustee applies to extend it due to non-cooperation or undisclosed assets). After discharge:
- Remaining qualifying debts are legally written off
- You can begin rebuilding credit — the sequestration remains on your credit file for 6 years
- You are removed from the Register of Insolvencies (public record) 3 months after the process closes
- Some professional restrictions apply during and after sequestration (financial services, law, certain public roles)
Sequestration vs Protected Trust Deed
| Factor | Sequestration | Protected Trust Deed |
|---|---|---|
| Duration | 12 months (+ income contributions up to 4 years) | 4 years of payments |
| Cost | £200 | Included in arrangement (fee from payments) |
| Surplus income needed | None required to qualify | Typically £100+/month required |
| Asset treatment | Trustee takes control — home at risk | More protective of home |
| Debt written off | Yes — most unsecured debts | Yes — remaining balance after 4 years |
| Credit file impact | 6 years | 6 years |
Rule of thumb: If you have assets (especially a home with equity), a PTD usually offers better protection. If you have no assets and no meaningful income, sequestration is often the most appropriate route.
Where to Get Free Debt Advice in Scotland
| Organisation | Contact |
|---|---|
| Citizens Advice Scotland | citizensadvice.org.uk/scotland |
| StepChange | stepchange.org / 0800 138 1111 |
| National Debtline | nationaldebtline.org / 0808 808 4000 |
| Money Adviser Network Scotland | mabs.ie (referral service) |
You must obtain a money adviser certificate before you can apply for sequestration. All the above organisations can provide this at no cost.