Reasons Why a Sequestration Order is the Right Debt Solution for You

Posted by National Debt Help on June 19th, 2019

It doesn’t feel like it, but as someone who’s struggling with debt you are one of many. During the first six months of 2018, 326,897 people contacted debt charity Step Change for help, while 28,951 individuals declared themselves bankrupt by the close of June 2018. But we know that these figures are of little comfort when you’re avoiding answering the door because of debt.

If you live in Scotland, you may be considering using a Sequestration Order – the Scottish equivalent of bankruptcy. In this guide we explain four signs that this form of insolvency is the right move to make.

Before Moving On – what is a Sequestration order?

A sequestration order is a legal order made by a court that officially declares you as bankrupt.

This order dictates that your assets must be managed by a trustee, including your home, who then manages the sale of your assets to generate funds for creditors.

Would you be eligible for a Sequestration Order?

Before we get into the signs that your financial situation would suit a Sequestration Order, we should first outline the eligibility criteria you must meet if you’re to be approved.

To qualify for a Sequestration Order you must…

• Owe more than £1,500
• Have lived in Scotland for 1 day, although additional evidence may be requested to prove you intend to stay in the country
• Not have been sequestrated in the last five years
• Be classed as insolvent, which means a creditor has issued a statuary demand or a charge for payment, or:
• You were not able to achieve protected status for your Trust Deed

What if you owe less than £1,500?

If you owe less than the required minimum for a Sequestration Order, you may want to apply for a Minimum Assets Process (MAP) which was previously known as LILA (Low Income, Low Asset).

The eligibility criteria for MAP are that you must:

• Owe more than £1,500
• Have lived in Scotland for 1 day (again, additional evidence may be requested to prove that you intend to stay in the country)
• Earn the National Minimum Wage or less for a 40 hour working week
• Have no more than £10,000 in assets, with none individually worth more than £1,000
• Own no land or property

Four signs a Sequestration Order is right for your financial circumstances

1. Your creditors are chasing you for payment

Your tummy turns every time the doorbell goes or the phone rings. You stopped opening your mail a while ago. All in all, you’re feeling the pressure from multiple creditors who are hounding you for money. This isn’t a nice place to be, and you’re ready for a solution.

2. You’re OK with selling your assets to finally dig your way out of debt

Selling your assets is daunting, but you’ve accepted that it must be done.

Should you move ahead with a Sequestration Order, your trustee will decide which of your assets can be sold, but they must leave you with a reasonable standard of living?

Under the terms of a Sequestration Order, all your assets can be sold, except for…

• Items required for day-to-day living
• Tools of the trade up to the value £1,000
• A car reasonably required by you, e.g. to travel to work, to the value of no more than £3,000

3. You’re MORE than ready to make payments over a period of four years

Following 12 months your Sequestration Order will be finished and you’ll no longer be officially bankrupt. However you may be required to make payments for a further three years. While this may seem like a long time, it does mean that your repayments will be manageable.

4. You’re willing to accept that a Sequestration Order will have an impact on your credit rating

You’ll be discharged from your Sequestration Order after 12 months, following which your bankruptcy will appear on your credit record for six years. It can be tough to re-build your credit rating after bankruptcy, but it can be done and you’re happy to accept the challenge.

Considering a Sequestration Order can be a scary step to take, but it’s also one that’s helping thousands of Scottish people out of debt each and every year.