The truth about bankruptcy
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Entering bankruptcy in Scotland? We’ll let you know what will happen.
Going bankrupt can seem like a big step for your finances and it’s normal to worry about how this will affect you. After all, you might not personally know anyone who’s been through the process so you might be wondering what to expect. While there’s a lot to consider with bankruptcy, it can be a fresh start for you and mean that you finally get your finances back under control.
But if you’re considering bankruptcy in Scotland – also called sequestration – will this be entirely different from the rest of the UK? How long will your bankruptcy last and what will actually happen? Don’t worry – we’ll take you through everything you need to know before going bankrupt in Scotland.
Going bankrupt in Scotland
Sequestration is the name for bankruptcy in Scotland but both terms mean the same thing. In fact, even if you live in Scotland, you may still hear people use the term ‘bankruptcy’. There’s no difference between the two words – they refer to the same process.
You can apply for sequestration yourself if you decide you want to become bankrupt – you don’t have to wait until a creditor tries to force you into the process. You’ll need to owe at least £1,500 to enter sequestration and you must live in Scotland, or have lived there for the last year. You also won’t be able to enter sequestration if you’ve already done so in the last five years.
To find out more about how to go bankrupt in Scotland and whether you’ll qualify for sequestration, check out our blog.
When will it finish?
The actual process of sequestration will last 12 months, just like bankruptcy in England and Wales. So as long as you abide by the rules of bankruptcy, you will be discharged after a year.
But depending on your circumstances, you might have to keep paying towards your sequestration even after your discharge. This can happen for up to four years – depending on how much you owe and how much you can afford to pay – so that’s an extra three years after the end of your sequestration.
You’ll only have to do this if you can afford to do so after you’ve paid your important bills and expenses and you won’t have to pay anything at all if your income is all benefits. Your Trustee – the person in charge of your finances under sequestration – can tell you if you’ll need to make payments based on what you’re earning and what you have to pay out for each month.
What is there to consider?
Of course, there’s more you need to think about with sequestration than just being debt free after 12 months. It will also affect your finances and your life in some negative ways.
Depending on how much equity you have in your home, you could be at risk of losing your property under sequestration. You might have to sell some of your other assets as well – such as your car – and pay any savings into your bankruptcy.
There are some jobs that sequestration can affect as well so if you’re considering this debt solution, it’s important that you check that you’ll still be able to work. These jobs include being a lawyer, an accountant, a police officer or a prison officer, but you can speak to a debt advisor to see if they think sequestration would affect your job.
And lastly, your sequestration will also seriously negatively affect your credit history for six years. If you’re credit checked at any point in this time, your sequestration will show up and could stop you getting certain services. This isn’t just if you’re applying for credit – creditors can also run a check on you if you apply for a rental contract.
What happens next?
After your sequestration is complete, it’s likely you’ll want to think about getting your finances back on track. One way to do this is to gradually start improving your credit score by keeping your financial records up to date and waiting some time before you borrow any money again.
If you’re thinking of applying for sequestration, speak to a debt expert before you do this. They’ll be able to tell you all about how bankruptcy will affect you and whether it’s the right solution for your circumstances. You can get in touch with our debt advisors using any of the options on the left if you have any questions about going bankrupt in Scotland or if you’re ready to apply.
by Emily BancroftBack to blog home