THE BANKRUPTCY AND DEBT ADVICE (SCOTLAND) ACT 2014 CAME INTO FORCE ON 1 APRIL 2015 AND THIS PAGE HAS NOT BEEN UPDATED. SEE OUR NEWS PAGES FOR AN OUTLINE OF THE NEW PROVISIONS.
Sequestration used to be exclusively a Court procedure. A debtor or creditor, or a trustee under a trust deed, can ask the Court to make an individual or a business bankrupt. After notice, the Court will decide whether or not to make an order.
The date of sequestration is the date when the Court first considers the matter. In the case of a creditor’s or trustee’s petition, the sequestration is therefore “backdated” to when the debtor was first cited to appear.
The Court can appoint an interim trustee on the warrant to cite - in other words until the Court decides what to do. That is unusual. The interim trustee is usually only appointed when the Court decide to make the estate bankrupt. The interim trustee then has to call a meeting for the creditors to elect a permanent trustee (although where she herself acts the Accountant in Bankruptcy can decide there is no purpose in such a meeting.)
Applying for your own sequestration
Most people can apply to the Accountant in Bankruptcy to make themselves bankrupt - and the Court is not involved. Guidance booklets (in various languages, the link is to the English version) and the application forms are available from the Accountant in Bankruptcy's website.
If you need to petition the Court for sequestration, you can get the forms and guidance from your local Sheriff Court.
To apply for your own sequestration you will need evidence of your apparent insolvency. This is not as obvious as it sounds - the Court is looking for specific documents such as a “charge for payment” or “statutory demand”. See the guidance booklets for details. You also have to pay the Accountant in Bankruptcy's fee (£200) and/or the Court fee.
Petitioning for someone else’s sequestration
We recommend you take legal advice. You can apply to have a particular Insolvency Practitioner appointed, but an IP may only consent to act if there are clearly sufficient assets, or if you agree to underwrite his fee. Alternatively, the Accountant in Bankruptcy can be appointed whether there are assets or not.
A word of caution
There may be over 4,000 sequestrations in Scotland every year, but it is not an easy option. Your creditors will not be able to pursue you for “old” debts and (after making contributions if your earnings are high enough) you can expect to be discharged after three years. However
- expect to lose any valuable property
- if you own your house, the trustee may need to sell it to realise the equity. Expect to lose it.
- you will have to make contributions from your earnings for three years (four years from spring 2015)
- if you win the lottery or inherit money etc. during the three (or four) years you will have to surrender it to your trustee
- it will be illegal for you to borrow more than £250, or buy goods on credit, without disclosing your status as an undischarged bankrupt
- you cannot stand for elected public office - e.g. parliament, local council, school board
- except with the permission of the Court, you cannot be a company director
- the credit reference agencies such as Equifax and Experian will note your position. You may have difficulties obtaining credit after your discharge. Your partner (or anyone else at you address) may also have to show that they are not financially dependent on you before they can obtain credit.
- You should take advice from your local authority’s money advisors, the Citizen’s Advice Bureau, or an Insolvency Practitioner before applying for your own bankruptcy.