SEQUESTRATION – (SCOTLAND)
BANKRUPTCY - (ENGLAND)
You may formally petition the court for your own bankruptcy (England & Wales only). There are certain requirements, which must be fulfilled before you can do this. Your total debt must exceed £1,500. A charge must be brought against you. (Scotland) In bankruptcy, a Trustee is appointed to administer your “estate” on behalf of your creditors, making payments to them, for a period of 1 to 3 years. One Creditor You could consider an informal or “quasi-bankruptcy”. This involves you or your adviser contacting all your creditors to offer them 3 years worth of payments from your disposable income in full and final settlement of all your debts.
Advantages
- No disposable income required.
- No consent from creditors needed.
A sequestration currently lasts for three years in Scotland. During this time an undischarged debtor is subject to restrictions and disqualifications. The Scottish Executive wants to encourage personal and business restart whilst upholding a ‘can pay, should pay’ principle. We consider that a reduction of bankruptcy to one year will help encourage individuals to move on with their lives, while the introduction of the proposed safeguards will offer protection and target restrictions where necessary. A one year bankruptcy period was the proposal where views were the most evenly divided. The main areas of concern expressed related to lack of control over the actions of a discharged debtor, lack of contributions towards debts and that a one year period offers no deterrent to individuals.
However, a person who is made bankrupt for one year will still have the same restrictions and penalties imposed in future as happens under the current three year period. A debtor still risks losing his/her home. Property will be transferred to the trustee to realise for the benefit of the creditors. Debtors who are bankrupt will continue to face restrictions on their finances, such as the ability to open a bank account and to obtain future credit, including mortgages. Trustees will still have the option to defer a debtor’s discharge when it is appropriate to do so.