Scotland has a separate law of insolvency to the rest of the UK. Whereas in England persons may enter an IVA or declare themselves to be bankrupt, north of the border Scottish trust deeds or sequestration are the equivalent measures.
Bankruptcy in Scotland is also known as “sequestration”. In many ways it is similar to bankruptcy in England, Wales and Northern Ireland. You can choose to make yourself bankrupt in a number of ways, or in certain circumstances creditors can seek to impose it upon you.
The Scottish equivalents to an IVA are known as trust deeds, or sometimes also as either Scottish trust deeds or protected trust deeds. Signing a trust deed in Scotland commits you to paying what you can afford towards your debts for an agreed period (which is generally three years though can sometimes be longer).
It's important to note that signing Scottish trust deeds also leads to your assets “vesting” in your Trustee, so homeowners and vehicle owners need to seek good Scottish trust deeds advice and clarification before signing-up.
Access to sequestration in Scotland is via a number of means. Some people meet the criteria for LILA bankruptcy (Low Income Low Asset) and can proceed on that basis. Typically you will need to have few significant assets and receive an income below the average for a working week on a minimum wage equivalent salary.
A more recent access point to bankruptcy in Scotland is the Certificate for Sequestration. An approved person can review your circumstances to confirm that you are insolvent. If they believe that you are they will issue you with a Certificate for Sequestration which can then be used to apply directly to the Accountant in Bankruptcy (Scotland's Insolvency Service) for sequestration. You cannot be charged by the person that issues you with a Certificate for Sequestration, but a £100 fee always applies in Scotland when applying to proceed with any type of bankruptcy.
Scottish trust deeds and sequestration aren't the only uniquely Scottish debt solutions. Another alternative, this time to an informal debt management plan, is known as the Debt Arrangement Scheme (DAS). The Debt Arrangement Scheme in Scotland is backed by legislation which guarantees a freeze being placed on interest and also confers legal protection from creditors. Unlike Scottish trust deeds or sequestration, the Debt Arrangement Scheme does not take account of assets like equity in a home.
Sequestration (perhaps using a Certificate for Sequestration), Scottish trust deeds and the Debt Arrangement Scheme constitute a unique set of potential debt solutions which is very different to that available elsewhere in the UK. Which one would be best for you if you're a resident of Scotland and are struggling with debt? Scottish trust deeds advisers will be able to guide you on the best fit for your circumstances after they have discussed your affairs with you.