When all available options are exhausted and you are unable to pay your debts, you may be able to apply for sequestration or your creditors may apply to the Sheriffs Court to declare you bankrupt.

All your assets including your home, car, investments, savings etc are passed to the Trustee and the Trustee may sell them to pay your creditors. A trustee is a person who administers your sequestration.

You have to meet certain criteria before you can apply for bankruptcy:

You need to owe at least or more than £1,500.

You should be living in Scotland or have lived in Scotland for some time during the last year.

You have not been made bankrupt in the last 5 years.

You need to submit an application form along with a cheque for £200 to the Accountant in Bankruptcy. There are no exemptions or reductions so the full amount needs to be paid.

You must also provide evidence that you are eligible to petition for your own bankruptcy.

Proof that you signed a Trust Deed which failed to become protected.

A Certificate of Sequestration granted by an authorised person and certifies that you are unable to pay your debts as they fall due.

You must meet the conditions for the Low Income, Low Assets (LILA) route.

You must be apparently insolvent. This usually takes the form of an expired Charge for Payment or expired Statutory Demand, which are legal documents normally served on you by a Messenger-at-Arms or Sheriff Officer.

You can still apply for Bankruptcy if a decree and a ‘charge for payment’ served on you and the 14 days allowed for payment have passed without you making a payment.

You can still apply for Bankruptcy even if a ‘summary warrant’ to recover rates or taxes and an attachment or an exceptional attachment order has been made against items you own and the 14 days allowed for payment have passed without you making a payment.

Bankruptcy normally lasts for a year. During this time you can’t borrow any more credit and you must let the Accountant in Bankruptcy know if your situation changes. You may have to sell valuable assets, but you can keep the things you need for day-to-day living.

Bankruptcy is a form of insolvency so your unsecured debts need to outweigh your assets, such as property or vehicles. Unsecured debts include things like credit card debt, personal loans and store cards.

Making yourself bankrupt is a big step to take and requires professional advice.

Bankruptcy may affect your job depending on who you work for and your role with the organisation. If you declare yourself bankrupt you will not be able to be director of a limited company.

Check with your HR department if you are concerned, your employment contract should state in if bankruptcy will affect your job.

If you are a homeowner and if there is equity in your property you may be asked to sell your home.

Please note that the following debts cannot be included in bankruptcy:
Student loans
Court Fines
Magistrates fines
Child support arrears

Advantages of Sequestration

Your creditors will not be able to take further action against you to recover monies outstanding.

No more payments directly to the creditors. If you can afford to do so, you will have to make a payment directly to the Trustee for 3 years

You may be discharged from the sequestration after 1 year, and all debts included in the sequestration will be written-off after this time.

Disadvantages of Sequestration

Your valuable items such as property, vehicles, savings, investments, etc, will be sold by the Trustee to repay your creditors. You will normally be allowed to keep items you need for day-to-day living such as clothes and furniture. You may also be able to keep a vehicle up to a value of £3,000 that is reasonably required by you.

It is important before entering sequestration to check the terms of your contract, speak to your employer as you may be at a risk of losing your employment.

Your credit rating will be affected for a minimum of six years. Even after this period, it may still be difficult to obtain credit.

If you are on a regular income, you may have to make a regular contribution into the sequestration.

If you receive any windfalls, inheritance, bonuses or similar, you'll be required to pay these to the Trustee.

Before you're discharged from sequestration, it'll be unlawful for you to borrow more than £500 unless you inform the lender that you're an un-discharged bankrupt.

If you are self-employed you cannot continue trading.

You will not be able to act as a director of a limited company, a member of any local council, a member of a school board or a Member of Parliament.

If you do not co-operate fully with the Trustee during the Sequestration, your Bankruptcy may be extended for an extra two years at a time.

DebtSolution4U.co.uk is not authorised to give advice under the Financial Services and Markets Act 2000. The general information and material provided and published on this website is for interest, understanding and for common knowledge purpose only. The details provided should not be taken as any kind of advice and cannot and should not be used to solve any kind of financial problems. You must take proper advice from authorised firm or financial advisor. We do not recommend or endorse any kind investment, advisor, product or services. We do not offer or imply any kind of advice, financial or legal. It is your responsibility to take appropriate action suitable to your needs.