What Is Sequestration
Sequestration is the act of a creditor or financial institution seizing personal property in Scotland in order to pay off debt owed by a person. Sequestration is derived from the Latin term sequestrare which means to surrender or set aside. In Scotland, sequestration is the term used for bankruptcy in most other countries.
A person in debt, known as a debtor, or their creditors can actually file a claim of sequestration with the Scottish court system if said debtor owes a certain amount of money. For a debtor to apply for it, they must owe more than £1500. If a creditor or financial institution applies for you then you must owe £3000 or more. In order for the process to begin, the debtor must be insolvent, or unable to pay off their debt. When creditors are involved this means they must have made unsuccessful attempts to have the debtor pay the owed amount back. Once a sequestration order has been approved by the court, a trustee will be assigned to the person in debt. It is the trustee’s job to sell off assets owned by the debtor in order to pay their creditors the money that is owed. While under an order of sequestration, the debtor is under certain restrictions that make applying for new credit extremely difficult. The sequestration orders issued by the court usually last for a year although certain situations allow for the sequestration order to be cut short in time.
Low income, low asset sequestration
A low income, low asset sequestration known as LILA was designed for those that wish to declare a self-sequestration order but cannot afford it. In order to qualify for low income, low asset sequestration you must:
• Owe more than £1500
• Have no more than £10,000 in personal assets with no single asset being worth more than £1000
• Own no property or land
• Be classified as insolvent, meaning you cannot pay off the debt you currently owe
• Earn an amount equal to or less than that of national minimum wage for a forty hour work week
• Have lived in Scotland for at least the previous twelve months
When a creditor applies you for sequestration, you will never be classified under a LILA sequestration since a creditor applied sequestration comes at no cost to you. It is only for those that wish to apply for a personal sequestration order.
While under a court sequestration order, there are certain obligations that you must lawfully abide by. These include:
• Answer all questions truthfully that are asked by your trustee when it comes to your financial status
• Provide all relevant paperwork to your trustee in regards to your business or financial standing
• Assist the trustee in the sale of your assets by signing over all requested assets
• Provide your trustee with a monthly for what it will take to provide for you and your family
• Inform your trustee in any changes of your financial status including loss of job, finding a new job, inheritance of property or money, and any money you may have come across by other means such as gambling
• Inform the trustee of a change of address. You are welcome to live anywhere while under a sequestration order so long as the trustee can effectively contact you
• Fully co-operate with the trustee in all matters during your sequestration
Should I apply for sequestration?
If you are considering applying for self-sequestration it is highly encouraged that you seek professional help beforehand. A financial advisor may be able to help you out of debt in a way not as serious as self-sequestration.
Posted in Bankruptcy