In Scotland, dealing with debt can be overwhelming, especially when sequestration, or bankruptcy, is imminent. Nonetheless, early advice is of the utmost importance. By exercising prompt action, one can increase the pool of potential solutions, thereby granting additional time to assess the situation and determine the most suitable course of action. Correct guidance can assist individuals already subject to sequestration in navigating the process. Depending on the circumstances, there may be opportunities to retain assets, such as residences, or even to revoke the sequestration.

Concerning insolvency and dealing with unmanageable debts, there are numerous misunderstandings and presumptions. However, gaining a comprehension of the fundamental aspects of bankruptcy and viable alternatives can shed light on a procedure that is unfamiliar and intimidating to the majority of individuals.


Sequestration, also known as bankruptcy, is a type of insolvency that not only affects individuals but also partnerships, trusts, and the estates of departed individuals. In sheriff courts, creditors who are owed more than £5,000 may file a petition for sequestration, or debtors who satisfy certain requirements may seek sequestration on their behalf.

The trustee, an insolvency practitioner appointed after sequestration is granted, assumes the duty of managing the individual’s estate in a manner that is advantageous to the creditors. To recover funds, the trustee will investigate the individual’s financial affairs and pursue asset sales, including the sale of their residence, in addition to revenue contributions. Assets that were previously bequeathed to family, friends, or third parties may still be recoverable and of interest if the complete value was not paid at the time.

Certain activities are prohibited by people who have not been discharged from bankruptcy, including holding certain positions, serving as company directors, and applying for credit. Additionally, certain employment contracts may contain termination clauses that take effect after insolvency.

Upon completing the continuous sequestration procedure, the trustee shall deduct their expenses from the funds recovered, and thereafter furnish creditors with a dividend equal to their claims, in addition to accrued interest. Any remaining funds will be refunded to the individual who placed them in seclusion. Unpaid unsecured obligations are written off, with specific exceptions.

The Debt Arrangement

Many individuals may be unaware that alternatives exist to sequestration. For instance, repayments can be made to individual creditors by agreements that halt enforcement action. Additionally, Scotland offers alternative statutory debt solutions. The Debt Arrangement Scheme protects against legal action by creditors and permits the repayment of debts in full over some time, with interest suspended. A Protected Trust Deed establishes a repayment agreement with creditors, either in full or in part. Creditors are obligated to abide by its terms and are precluded from pursuing their losses or engaging in sequestration.

One may also request a moratorium, which would grant them six months of respite from the pursuit of debt recovery by their creditors. It allows you to organise your finances and contemplate the most appropriate statutory debt solution.

It is unsettling to be on the verge of bankruptcy, and the temptation to conceal one’s head in the sand is strong. However, financial difficulties will persist and are likely to worsen in the absence of action. Seeking guidance and taking prompt action are crucial in resolving such issues and provide direction for your subsequent actions.