What Does Sequestration Mean – Trust Deed Scotland Forum
Insolvency or bankruptcy in Scotland is termed as sequestration. The word sequestration by itself means taking away one’s assets in lieu of the debts owed by him/her. Sequestration can result from voluntary or involuntary action. Involuntary action is initiated by creditors who, after several attempts to recover dues are convinced that the debtor cannot pay up except through a process of sequestration. If the court takes cognisance of such a submission, the debtor may be declared insolvent and sequestration proceedings can be started. In the other scenario, the debtor initiates sequestration proceedings by applying to the court to declare him/her insolvent.
The personal debt situation for many Scottish residents is so alarming that almost every single day, at least 40 people are applying for sequestration.
How to Set Up Sequestration
The Scottish government has thoughtfully devised two different solutions for people looking to opt for the bankruptcy/sequestration option. While the first option is sequestration itself that applies to a larger percentage of Scottish citizens, the second option is LILA and is applicable only to Scottish residents with low income and low assets. Thus, for wage earners who hardly manage to get the minimum wage of £270 per week and their total asset value does not exceed £10,000 with no single asset being valued over £1,000 the LILA or Low Income Low Asset debt solution is the perfect answer. No court proceedings are necessary to set up LILA though your minimum debt should be £1,500. Similarly, your weekly wages should not be in excess of the national minimum wage of £248 per week. However, certain types of benefits will not be considered while computing income for the purpose of LILA. It takes about 8 to 12 weeks to set up a LILA for you and creditors are prevented from pursuing any recovery action against you once the debt solution has been set up. LILA may not qualify as the best debt solution for business owners. A Trust Deed should also be considered in these circumstances.
Sequestration is the option to be considered when you do not qualify for LILA. The first step is to establish ‘apparent insolvency’ through a court order. The Court will examine your personal financial circumstances in relation to your debts and declare you as an insolvent person when enough material evidence is arrayed. Upon receipt of the court order, you can approach an approved insolvency practitioner to set up sequestration for you. It takes about 8 to 12 weeks for the sequestration to be set up and you would need to find £200 as the fee. An official receiver appointed by the court will take over your assets after the sequestration is set up and sell them. Out of the sale proceeds, the fee for administering the sequestration and other related expenses will be taken out and the remainder distributed equitably among the creditors.
Sequestration comes with its share of consequences. Public records will carry the fact of your sequestration and obtaining fresh credit will become challenging. Apart from social embarrassment, your employment could be at risk since some employers may consider sequestration as ‘inappropriate behaviour’ and institute measures for separation from employment. Clawing back into the mainstream of life can be time consuming, particularly after sequestration has taken away all your assets including your dwelling.