What is Sequestration?

In Scotland, the term “sequestration” is used to refer to the legal process equivalent to bankruptcy in other jurisdictions. It’s a formal insolvency procedure that involves transferring a debtor’s estate to a trustee, who then liquidates the assets to pay off the creditors as much as possible.

This process can be voluntary if a debtor is unable to pay their debts and chooses to petition for their own sequestration. It can also be involuntary if a creditor who is owed at least £3,000 petitions the court to sequestrate a debtor’s estate.

Once sequestration has occurred, the debtor is usually discharged from their debts after a year, though the trustee can continue to realize assets and make distributions to creditors for up to 4 years after the date of sequestration. There can also be restrictions on obtaining credit and starting a business during and after sequestration.

The benefits are that an insolvency practitioner will deal with your creditors on your behalf, stop contact from creditors, legal action and ensure repayments in a four year term are affordable.

It’s important to note that sequestration should be considered a last resort, as it has serious consequences, including a significant impact on credit rating.