In the first part of this article we looked at what sequestration is. In this second part, we explain the impact of sequestration and things you need to know before you decide to go ahead with this debt solution.
If you are sequestrated, your creditors can no longer take legal action against you and once discharged from your sequestration, you will no longer have to make any further payments towards your debts.
However, there are things you must be aware of:
Your sequestration will be in the public domain
Your sequestration details will be published in the Edinburgh Gazette, the Scottish equivalent of the London Gazette where bankruptcy details are published.
Your credit rating
Although sequestration can free you from debt, your credit rating will be impacted for many years after and you may therefore find it difficult to get credit in the future.
Even after 1 year of sequestration, you may still have to make contributions
You can expect to be discharged after 1 year in sequestration; however, you may have to continue to make contributions for up to 3 years depending on your surplus income.
Your home may be at risk
The Trustee is interested in any equity you have in your property that can be paid to creditors. Equity is the difference between the market value of your property and the remaining credit to be paid on your home, for example, your mortgage. The amount outstanding on the mortgage will be established by a house valuation to determine the sum that can be paid to creditors.
Other assets may have to be sold
Other assets you own are looked at on an individual basis and may be sold depending on their value and their use. Household goods and trade tools are rarely sold by the Trustee providing they are not overly expensive.
There are benefits of sequestration as a debt solution if your circumstances fit. If you are considering it, you must weigh up your options and the impact it will have on you and your family. It could be you qualify for a Protected Trust Deed instead which may prove a better solution for your circumstances and result in less severe financial restrictions. However, if this avenue has been explored and you opt for sequestration then advice and help is available from us.