Sequestration (Scotland)

What sequestration is

Sequestration is the Scottish term for bankruptcy. It's a formal insolvency process that writes off most of your debts, typically over a 12-month period, and gives you a fresh start. The process is governed by the Bankruptcy (Scotland) Act 2016 and administered by the Accountant in Bankruptcy (AiB), Scotland's insolvency service.

Sequestration is a serious legal step with significant consequences. Most assets above protected limits become the property of a Trustee (an Insolvency Practitioner or AiB officer) who realises them for creditors. Your name appears on the public Register of Insolvencies, and the sequestration affects your credit file for 6 years. But at the end of the process, you're discharged from the debts covered by the sequestration — meaning they are written off and you can no longer be pursued for them.

The two routes to sequestration

Scotland has two main routes into sequestration, plus the separate Minimal Asset Process (MAP) for people with very limited assets:

• Full administration sequestration. The standard route, used when you have meaningful assets, debts above £5,000, or don't qualify for MAP. Application fee currently £150 (waived for people on certain low-income benefits).
• Minimal Asset Process (MAP). A streamlined, lower-cost route for people on low incomes with minimal assets and debts between £1,500 and £25,000. Application fee £50 (waived for those on qualifying benefits). See our MAP page for full details.
• Creditor petition. A creditor can also petition for your sequestration if you owe them £3,000 or more. This is less common than debtor-initiated routes.

How sequestration works in practice

For debtor-initiated full sequestration, the process moves through clear stages:

1. Money advice. Before applying, you must obtain advice from a qualified Money Adviser (a free service available through Citizens Advice Scotland and many council money advice teams). This is a legal requirement.
2. Application. You complete the Debtor Application Pack and submit it to AiB with the £150 fee.
3. Award of sequestration. AiB reviews and (if eligible) awards sequestration. From this point your debts are frozen and creditors cannot take action against you.
4. Trustee appointed. The AiB or an external Insolvency Practitioner is appointed as Trustee. They take control of your "estate" — your assets above protected thresholds.
5. Investigation and asset realisation. The Trustee investigates your circumstances, sells any non-essential assets, and may agree a Debtor Contribution Order (DCO) — monthly payments from disposable income.
6. Discharge. Most debtors are automatically discharged from their debts after 12 months. The Trustee's work may continue beyond this point, particularly for asset realisation.

Who sequestration tends to suit

Sequestration suits people in Scotland for whom less severe formal solutions wouldn't work:

• You live in Scotland
• Your debts are at a level where repaying them in any reasonable timeframe isn't feasible
• You don't qualify for, or don't want, a Trust Deed or DAS
• You have minimal disposable income or are willing to make contributions from disposable income for up to 4 years
• You're prepared for the credit consequences and public register listing

What sequestration costs

The application fee for full administration sequestration is currently £150, waived if you're receiving certain low-income benefits (including Universal Credit, JSA, ESA in some forms, and Pension Credit). For MAP applications the fee is £50, with the same waivers available.

If a Debtor Contribution Order is set, you'll pay a portion of your disposable income to the Trustee for up to 48 months. The DCO is set based on the Common Financial Tool (Scotland's equivalent of the Standard Financial Statement).

How long sequestration lasts

For most debtors, automatic discharge happens after 12 months. After this point, you're no longer bankrupt and the debts covered by the sequestration are written off. However:

• The Trustee's work may continue beyond 12 months — particularly asset realisation
• A Debtor Contribution Order (if set) may continue for up to 48 months from the date of sequestration
• The sequestration stays on your credit file for 6 years from the date awarded
• Your name remains on the public Register of Insolvencies for 2 years after discharge

What happens to your home in sequestration

Your home is the most significant asset that can be affected by sequestration. The position depends on equity:

• If there's no equity (mortgage is at or above the property's value), the Trustee will usually disclaim any interest within 3 years and your home is unaffected provided you keep up mortgage payments.
• If there's equity, the Trustee has options including selling the property, requiring you to buy out the Trustee's interest (often through remortgaging), or coming to an arrangement that protects the home.
• Spouse/partner protection. If the home is jointly owned, only the bankrupt party's share is affected — but this can still lead to forced sale in some circumstances.
• Family home protection. Under section 113 of the 2016 Act, the Trustee cannot sell the family home without the consent of the spouse or court order. This is a significant protection for families.

Which debts sequestration covers

Sequestration covers most unsecured debts including credit cards, loans, council tax arrears, certain HMRC debts, utility arrears, and personal guarantees. Some debts cannot be discharged through sequestration:

• Court fines
• Child maintenance arrears
• Student loans
• TV licence debts
• Debts obtained by fraud
• Secured debts where the security is being kept (mortgages, car finance you're continuing to pay)

How sequestration affects your credit, home and work

Sequestration is recorded on the Register of Insolvencies and stays on your credit file for 6 years from the date awarded. While bankrupt, you cannot take out credit over £2,000 without disclosing the sequestration, and most lenders will refuse credit applications outright.

Certain Scottish professions have specific restrictions including financial services, law, and some company directorships. The Trustee can apply for a Bankruptcy Restrictions Order (BRO) lasting up to 15 years if your conduct has been dishonest or reckless — but this is rare.

If sequestration doesn't go as planned

If your circumstances change during sequestration, contact your Trustee immediately. The Debtor Contribution Order can be varied. If you fail to cooperate with the Trustee or hide assets, the Trustee can apply for a Bankruptcy Restrictions Order, extending the restrictions and damaging your discharge prospects. Cooperation is critical throughout.

How UK Debt Team can help

We're an introducer, not a debt advice service. Deciding whether sequestration is right — versus a Trust Deed, DAS, MAP, or another approach — is the role of a regulated Scottish debt adviser or Insolvency Practitioner, not us.

What we do is connect people seeking help with regulated solution providers. There's no cost or obligation to use the “Speak to a sequestration specialist” button below. If you'd rather go straight to free regulated debt advice, Citizens Advice Scotland and the other organisations listed below are an excellent place to start.