There is so much terminology today in relation to debt problems and in particular debt solutions that it is easy to get confused. In today’s credit driven society there is now such a range of debt solutions and they are often described in technical terms and ‘information overload’ can so easily kick in. This is a real problem as people with debt problems need to get to the facts and quickly understand how the different solutions work and what they can mean for them personally, without having to work their way through the jargon.
So for example a question that is often asked is: what is the difference between bankruptcy and sequestration. The simple answer is that in Scotland there is absolutely no difference. They are two different words that describe the same process. Sequestration is the Scottish word for bankruptcy and the two can be used interchangeably. In the rest of the UK the process is called bankruptcy only. So if you are a Scottish resident then the information you find on the process of sequestration applies equally to bankruptcy and vice versa.
So what is bankruptcy or sequestration?
For the purposes of this article we will use the word bankruptcy to describe the process but it can easily be substituted by sequestration for people living in Scotland. Bankruptcy is a legal process developed by the Government to assist people who are in the situation where they are unable to or unlikely to be able to repay their debts in a reasonable period of time. In order to qualify for bankruptcy you must also be insolvent which basically means that you owe more than the total value of your assets. The bankruptcy process sets out a legal framework that enables people to write off the debt they cannot afford and bring a formal conclusion to their debt problems.
How it works
There are different procedures for bankruptcy depending on whether you live in England, Wales, Northern Ireland or Scotland although the overall principles are the same. You need to apply to the court to be made bankrupt and pay the associated costs and fees. Once your bankruptcy has been sanctioned and approved by the Courts it becomes a legally binding agreement which all parties must adhere to and it means that all creditors involved can no longer pursue the debtor for monies owed or take legal action to recover debts. High value assets will normally be sold to help pay outstanding amounts owed and becoming bankrupt can impose financial restrictions and can restrict you from employment in certain occupations.
You are normally discharged from bankruptcy after a year however it continues to be noted on your credit history for a further five years after discharge. The main advantage of bankruptcy is that it enables people to make a new start free of debt.
It’s a big step
Bankruptcy is an important decision to make and is generally considered as a last resort solution. It is therefore important to ensure you have all the facts to hand before making a decision and the best way to do this is to seek professional debt advice. This will give you an objective and expert view on what your options are and the help you need to select the best route for your own individual circumstances.