Help with debt and bad credit
For people in England struggling with unmanageable debts, sequestration may be the best option. Sequestration is equivalent of Bankruptcy, a formal arrangement to deal with debts that you are unable to repay with within a reasonable period of time.
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Owing many debts is not the end of life, and there are better ways to deal without thinking of the worst. Sequestration is another close accomplice to bankruptcy in the debt management scheme, and using it can restore your peace of mind. Moreover, you will have a good ground to start all over.
Let’s dive into the subject.
What is Sequestration?
Sequestration is the legal means of dealing with Insolvency, a condition in which a debtor is unable to pay-off his/her debts. It’s much like bankruptcy. The only difference between the two terms is that bankruptcy is available in Wales, Northern Ireland, and England, while sequestration is used only in Scotland. In short, sequestration is Scotland’s bankruptcy.
A debtor can only sequestrate whenever they owe one or more creditors a total amount of nothing less than £3000. Whereas, a creditor can sequestrate a person that’s owing to him a debt of or over £1500. Debtors can initiate the process of sequestration. Meanwhile, they can wait until their creditor(s) takes legal action against them.
Sequestration can only be used to clear or write off unsecured debts; that’s loans given to you by creditors without collateral. These debts include utility bills, rents, medical bills, and loans gotten through credit cards. And because of the no-collateral condition, creditors usually issue unsecured debts at higher rates making it sometimes difficult for debtors to pay. Therefore, as time goes, creditors are usually forced to take the debtors to court to sequestrate to get their money back in full or part.
How to Sequestrate?
To sequestrate, the debtor will first make payment of £200 to get the application form. The application form will be submitted at the AiB (Accountant in Bankruptcy) together with a proof of debt ownership or a certificate of Insolvency issued by an insolvency practitioner (IP).
After the submission, the court will then decide on whether the person should sequestrate or not. If he’s eligible, the court will assign him a trustee who will be in charge of his property and sees that they are sold out to settle the debts. The trustee will also distribute the resulting money between the creditors. Meanwhile, the sequestration might demand that the debtor pay a set amount every month for some period to clear off a significant percentage of the debt.
In sequestration, a person is usually relieved of their debts in 12 months, provided that he fulfills his part of the agreement. However, the monthly payment may still go on until the set time, while some of the debts are written off. Sequestration will negatively impact the credit score of the sequestrated person for six years, and it will be hard for him/her to get a loan in the nearest future.
Who can sequestrate?
The following are the conditions that make one eligible for sequestration;
The person must have lived the preceding 12 months in Scotland, be a citizen of Scotland, or runs a business in Scotland.
- The person’s debts must be more than £3000.
- He/she must not have declared bankruptcy in the last five years.
- The person must see sequestration as a last resort meaning that he/she is in a state of Insolvency and must possess a certificate of Insolvency.
- He/she must be able to afford the $200 for the application form at once or have an earning to pay for it in installment.
- The person must have been to an authorized person or legal professional in the field for advice.
What will happen to the debtor’s valued properties during sequestration?
As mentioned above, a trustee will be assigned to monitor the debtor properties, and he will ensure that they are converted to money and used to pay the creditors. However, that doesn’t mean a person will lose all their properties/assets to sequestration. Let’s take a look at what will happen to your home and your car when you sequestrate.
The decision is to be made by your trustee, but we can still make some guesses. You may not lose your home to sequestration if it’s of less value or less equity and may not even make a huge difference if sold to pay the debts.
However, if you are scared of losing your house, you can contact a third party such as a friend or family member to help you out with some of the debts. You can also avoid the risk of losing your home by extending the monthly payment period. Another way out is to enter a mortgage program that will make the property of little or negative equity.
The same equity principle applies to your car. However, there is a higher chance of losing it if it is new, has high equity, or costs over £3000 unless there’s any hire purchase agreement.
Advantages of Sequestration
The following are the benefits in Sequestrating;
- Sequestration helps you to write off up all of your unsecured debts
- Sequestration gives debtors the chance to start all over again
- Once a debtor sequestration has been approved, the creditor has no other choice but to go with it
- Sequestration frees debtors from calls, threats, and emails from their creditors
- It’s against the law for a creditor to take legal action against a debtor that is undergoing sequestration
- Sequestration will put an end to the interest charged by creditors, thereby leaving the debtor to pay only the outstanding debts
- The trustee will be the one to manage your properties and distribute the money between the creditors
- The allocated monthly payment will be calculated in such a way that it won’t affect your living
Disadvantages of Sequestration
- A sequestrated person can no longer hold a managerial role or position in an organization or company.
- Sequestration does affect the credit score of a person for six years.
- The person may not be able to find a creditor to loan them money in the future. And must tell the person that he has once been bankrupt if they are lucky to find a creditor who is willing to loan them some amount.
- Sequestration comes with a four-year acquired policy. It’s a policy that puts the trustee in charge of the debtor’s properties for four years from the day the sequestration is approved.