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Bankruptcy in Scotland

In Scotland, bankruptcy is known as Sequestration. The term is derived from the Latin meaning:

TO set aside or surrender, a late use, is derived from sequester, a depositary or trustee, one in whose hands a thing in dispute was placed until the dispute was settled.

Changes to Scottish government legislation in 2010 broke this down further into two main types.

LILA Sequestratio

Low Income Low Asset Sequestration (LILA) is aimed towards people with little or no assets and too low an income to repay their creditors. The duration is normally 12 months and a fee of 100GBP needs to be paid in order for it to be setup by a nominated insolvency practitioner. A nominated insolvency practitioner is essential the Scottish equivalent of a bankruptcy administrator in the United States.

Certificate for Sequestration

The certificate for sequestration as introduced in 2010 helps people who have too much disposable income to qualify for a LILA sequestration but have too little debt to qualify for protected trust deeds and/or cannot repay their unsecured debts within a realistic timescale.

Under the terms of the certificate for sequestration, it is possible to setup in a way in that an individual can keep their assets such as a house or car, although some conditions may apply.

Limitations of Bankruptcy in Scotland

Sequestration is not suitable for anyone with excessive surplus equity.

Sequestration should only be considered in Scotland where an individual has exhausted all other reasonable efforts to resolve their financial difficulties.

Any form of personal insolvency will have a lasting impact on a person’s credit history and some occupations may forbid their employees to work for them should they have a prior bankruptcy decree.

Other Methods of Debt Management in Scotland

There are two other methods of clearing debts that are used in Scotland and that also use government legislation. These are known as the Debt Arrangement Scheme and the aforementioned Protected Trust Deed.

A Protected Trust is another form of personal insolvency that can write off an element of the unsecured personal debts that an individual may have, within typically 36 months.

The Debt Arrangement Scheme is a formal and legally binding improvement upon debt management plans that help people to manage their debts, reduce payments to a manageable level and legally freeze creditor interest and charges.

Trust Deed Scotland, a leading introducer of personal insolvency debt resolution services have given advice to thousands of Scots based residents on certificates for sequestration, protected trust deeds and LILA sequestration.

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