Sequestration in Aberdeen – Scottish Bankruptcy Explained

Sequestration is the Scottish term for bankruptcy. It is a formal legal process for individuals in Aberdeen (and across Scotland) who cannot pay their debts and have no prospect of doing so.

You must apply through the Accountant in Bankruptcy (AiB) and usually need to seek advice from an approved money adviser or insolvency practitioner first to ensure it's the right solution for you.

Alternatives for residents in Aberdeen may include a Trust Deed or the Debt Arrangement Scheme (DAS), depending on your financial situation and whether you want to protect certain assets.

In most cases, you will be discharged from sequestration after 12 months from the date your sequestration was awarded. However, the Accountant in Bankruptcy (AiB) can defer your discharge if you have not cooperated with the process or have committed an offence. Your trustee may also continue to administer your estate after your discharge if there are still assets to deal with.

Sequestration can affect certain types of employment in Aberdeen. You are legally barred from acting as a company director, and certain regulated professions — including some financial services roles, positions of trust, and roles involving fiduciary responsibility — may require you to disclose your sequestration. Some employers include clauses in contracts that are triggered by insolvency. It is important to check your employment contract and seek advice before proceeding.

When you enter sequestration, most of your assets pass to your trustee, who will sell them to repay creditors as far as possible. This can include savings, investments, and non-essential property. Your home may be sold if you have equity in it. Essential household items, tools you need for work, and a vehicle up to a certain value may be protected. The trustee will assess your circumstances carefully and you should seek advice to understand what you are at risk of losing.

A Protected Trust Deed is a formal voluntary agreement available only in Scotland, where you make affordable monthly payments over at least four years and any remaining debt is written off at the end. Unlike sequestration, a Protected Trust Deed allows you to retain more control and avoids some of the more severe consequences, such as automatic restrictions on acting as a director. It is only protected once enough creditors have agreed to it, at which point dissenting creditors are bound.

Sequestration will be recorded on your credit file for six years and will significantly affect your ability to obtain credit during that time. You cannot borrow more than £2,000 without disclosing that you are sequestrated. After discharge and once the record is removed from your credit file, you can begin to rebuild your credit history through responsible financial behaviour and products designed for credit rebuilding.

An IVA typically lasts 5 years, extended to 6 years if you have equity in a property. During this period you make one affordable monthly payment to your Insolvency Practitioner who distributes it to your creditors. At the end of the IVA term any remaining qualifying unsecured debt is legally written off.

Most employees are unaffected by an IVA as it is not publicly announced to employers. However certain regulated professions including solicitors, accountants, financial advisers, police officers, and some civil service roles may have contractual or regulatory restrictions. Always check your employment contract and professional regulatory requirements before entering an IVA.

You can usually keep a car in an IVA if it is essential for work or family needs and its value does not significantly exceed what is considered reasonable. Cars worth more than approximately £5,000 may need to be discussed as part of the IVA proposal. Many people successfully keep their vehicles throughout their IVA.

Unsecured debts that can typically be included are credit cards, personal loans, overdrafts, store cards, payday loans, catalogue debts, and utility arrears. Secured debts such as mortgages, student loans, child maintenance arrears, magistrates court fines, and social fund loans cannot be included.

An IVA is recorded on your credit file at the date it is approved and typically causes a significant reduction in your credit score. It remains on your credit file for 6 years from the start date. After completion you can begin rebuilding through responsible use of credit builder products and maintaining all financial commitments on time.

Missing one or two payments is not automatically fatal. Your Insolvency Practitioner can apply for a payment break of up to 6 months or propose a variation if your circumstances have changed. Persistently missing payments without communicating with your Insolvency Practitioner can lead to the IVA failing and creditors pursuing bankruptcy proceedings.