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A Guide to Bankruptcy in Scotland Part 2
DoshDolt
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Possessions
If sequestration is granted, the trustee has the power to sell some of your possessions, but you will not lose everything. You can keep many possessions and household goods, so that you or anyone living with you as part of the family can live without undue hardship. Specific items which can be kept are those which are exempt from attachment or exceptional attachment.
You should be aware that you can also keep any items that are essential for employment, i.e., joiner’s tools, but only to a maximum of around £1,000. You should discuss with the trustee what is essential for work, for example, a car. It may be difficult to argue a case for keeping some goods that are used for employment if they have a high value or require expensive insurance cover.
Most household items will not be sold. However, items which go beyond satisfying basic domestic needs such as antiques, or a car might be sold in sequestration.
It is possible for you, if you are in employment, to be allowed to keep a car if:-
The following list is the items that the AiB has NO INTEREST IN if they were to sell off your possessions.
Examples of essential items are the following items if used in the debtor’s home:
Beds, bedding, household linen and curtains
Food, cooking equipment and kitchen utensils
Refrigerators, washing machines and microwave ovens
Chairs, settees, tables and other furniture
Lights, fittings and heating appliances
Floor coverings
Articles used for cleaning, drying, mending or pressing clothes
Articles used for cleaning the house
Articles used for safety in the house
Tools used for maintenance or repair of the house and household articles
Computers and accessory equipment
Radios, telephones and televisions
Jointly owned possessions
If you are married or a civil partner the trustee may need to sell any jointly owned property. In these circumstances: -
If the trustee claims that goods or possessions are jointly owned but your partner believes that they are hers/his alone, s/he should obtain proof of ownership and show this to the trustee. If s/he has no receipts, s/he should make a sworn statement (an affidavit) before a solicitor stating how s/he obtained the goods. If the trustee will not accept this, the partner will need to make an application to court to establish the ownership of the possessions.
If you are not married or a civil partner the only domestic possessions which can be sold are those belonging to you alone. Goods bought jointly cannot be sold: this includes goods bought jointly with a partner of either sex.
Any goods in the home that do not belong to you, for example, a spouse’s jewellery that was inherited, cannot be sold and do not become the property of the trustee. If the trustee does not accept that certain goods do not belong to you, the person claiming ownership may have to apply to court for an order preventing the trustee from selling the goods.
If you own goods jointly with a business associate they may be sold and the proceeds allocated to the relevant parties.
Gifts or Undervalued Sales
The trustee may enquire into all the gifts and sales made by you during the five years before sequestration. If the trustee can show that you were not solvent at the time of any gift or undervalued sale the trustee will be entitled to possession and if necessary may apply to the court for an appropriate order. For example, if you "sell" a car to your spouse or civil partner, for say £1,000 when it is worth £2,000, the trustee may apply to sell the car. The trustee would keep £1,000 for creditors, repaying the original purchase price of £1,000 to the spouse or civil partner. Fraudulent disposal of property is also a criminal offence. Special rules apply to your home.
Obtaining credit
If you are sequestrated, you must not obtain credit (alone or jointly) of more than £500 in a single transaction or over £1,000 in several transactions, without informing the lender that you are sequestrated. If you do not do this, you will commit a criminal offence. ‘Credit’ here means not only borrowing money to pay for goods or services but also any situation where you order goods or services on the basis that you are billed and pay later, for example house repairs. However, it doesn’t include credit agreements set up to repay utility supplies or council tax.
If you have been sequestrated, you may find it difficult to obtain credit facilities to pay utility bills or council tax through instalments in your own name without a guarantor. However, if you do have these arrangements, they will not be counted as credit for the purposes of calculating whether you have committed a criminal offence in obtaining credit.
You may have problems in obtaining a mortgage in future.
Opening a bank account
A sequestrated person may open a new bank or building society account so long as it does not have loan or overdraft facilities. You should inform the trustee that you are doing so. The trustee must inform the bank or building society of the sequestration and you may find that your existing bank account will be frozen or closed by your bank when the bank is notified of your sequestration. You may find it difficult to open a new bank or building society account, even if it does not have loan or overdraft facilities. If at any time the balance of the account is more than is necessary to meet the ‘reasonable’ needs of you and your family the trustee may take possession of the surplus.
What money will you have to live on?
Earned income
Income Payment Agreements (SPAs) and Income Payment Orders (IPOs)
If you are in employment you may keep your wage to live on. The trustee will seek to negotiate an Income Payment Agreement (IPA) with you. An IPA is a written agreement between you and the trustee, in which you agree to pay to the trustee a proportion of any income that you receive after sequestration. An IPA can be made without the involvement of the court and there aren’t criminal sanctions for defaulting. However, if you fail to make payments as agreed under an IPA, the trustee can apply to the sheriff to have the remaining payments due converted to an Income Payment Order (IPO) and such an application can be made before or after the date of your discharge.
If an agreement between you and the trustee is not possible or proves to be ineffective, the trustee may apply to the court for an Income Payment Order (IPO) requiring you to pay to the trustee a proportion of any income that you receive. The Order may also require a third party to pay income due to you straight to the trustee instead. An IPO must be applied for by the trustee before the date of your discharge (except in the case of a conversion from a failed IPA) and it can run for a period of up to 3 years from the date they are set up. It is a criminal offence to breach the terms of an IPO.
Benefits
When the client is not in employment, you should be allowed to keep the full benefit entitlement you receive.
Problems may arise where your benefit is paid directly into a bank account, since your accounts will be frozen as soon as the sequestration order is granted. Before applying for sequestration you should inform the DWP, so that, if necessary, alternative arrangements for payments can be made.
Social fund loans and benefits overpayments
The DWP can continue to recover social fund loans and other previously overpaid benefits from the benefits of a sequestrated person. This applies even if the social fund loan or overpayment was included in the sequestration.
If you cease to claim benefits, then the recovery of the social fund loan or overpaid benefit will be suspended until you make a new claim. If you have not made a new claim by the time you are discharged from the sequestration, any amount still outstanding will be written off.
Redundancy payments
If you lose a job after the date of sequestration any statutory redundancy payment or pay in lieu of notice belongs to you. If the employer makes any other payment about the loss of job (for example, under an employer’s redundancy scheme, or an ex gratia payment) this sum belongs to the trustee and will be passed on to creditors.
Settlements on divorce or dissolution of a civil partnership
If you have got divorced or have dissolved a civil partnership in the previous five years the trustee will investigate the terms of the divorce or dissolution settlement. If a capital sum or property transfer order was made up to five years before the sequestration, the trustee can ask the court to recall the order so that the money or property can pass to the creditors.
The court will not recall an order unless it can be shown that your liabilities exceeded assets at the time of the order or as a result of the order. The court will also consider the financial circumstances of your ex-partner. However, even if a divorce or dissolution settlement was made in good faith it can be overturned by a sequestration.
Private and occupational pensions
The effect of sequestration on your pension will depend on a number of factors.
If you are actually in receipt of a pension (of whatever kind) at the date of your sequestration, this income will not be transferred to the trustee, although the trustee will be able to seek a contribution for creditors from the income.
If you have a future entitlement to a pension these pension rights do not become controlled by the trustee and you cannot be forced to cash in the pension early for the benefit of creditors. This applies to almost all approved personal and occupational pensions.
If the pension comes into effect before you are discharged from the sequestration and you begin to receive an income from it, the trustee will be able to seek a contribution from this income for the benefit of creditors by way of an Income Payment Agreement (IPA) or an Income Payment Order (IPO). The trustee can seek a one-off contribution from any lump sum element of a pension.
If you are unhappy with any action by the court granting an IPO to the trustee for the income from your pension you should apply to the sheriff court for a review of the decision (endnote 2).
What happens if your income changes?
You should be aware that if you choose sequestration, any change in your income must be reported to the trustee. This means, for example, that if you have an unexpected generous pay rise, it will be up to the trustee to decide whether or not you can keep the extra income. The trustee will consider how much money you need for living expenses, and should take a realistic attitude to your needs. The court can also vary the proportion of income you can keep in the event of any increase or decrease in earnings following sequestration.
Any other money which you receives belongs to the trustee and will be passed on to creditors, for example:-
Past actions which may become a criminal offence under Sequestration
You may have committed a criminal offence, if, up to one year before your sequestration :-
sold assets for less than full value; or
gave assets to a creditor as security for existing debts where this was unfair to other creditors
You will be guilty of a criminal offence if, during or after sequestration, you:-
If you were sequestrated in Scotland, you will be deemed to have committed one of the criminal offences relating to sequestration if the offence took place anywhere in the UK, not just in Scotland.
Restrictions after discharge
Bankruptcy Restrictions Orders (BROs)
A Bankruptcy Restrictions Order (BRO) is a way of imposing a variety of restrictions on a sequestrated person for a period of time following her/his discharge from the sequestration. The Accountant in Bankruptcy (AiB) will make an application for a BRO when a debtor’s conduct has been dishonest or blameworthy in some way in relation to the sequestration.
An application for a BRO is made by the Accountant in Bankruptcy to the sheriff court and must usually be made after the date of sequestration but before the date of discharge from sequestration.
In deciding whether to grant a BRO, the sheriff can consider the conduct of the debtor both before and after the date of sequestration but must not take into account any conduct of the debtor before 1st April 2008. Examples of the conduct which the sheriff will take into account when considering an application for a BRO include:-
Interim Bankruptcy Restrictions Orders
In some cases, if it is thought to be in the public interest, the Accountant in Bankruptcy may apply to the sheriff court for an Interim Bankruptcy Restrictions Order (BRO) to be made. An interim BRO would cover the period of time between the application for the full BRO being made and the decision being made by the sheriff. An interim BRO has the same effect as a full BRO. Where an interim BRO is followed by a full BRO, the duration of the full BRO starts from the date that the interim BRO was made.
Bankruptcy Restrictions Undertakings (BRUs)
A Bankruptcy Restrictions Undertaking (BRU) is very similar to a Bankruptcy Restrictions Order (BRO). The main difference is that it is formed by agreement between the debtor and the AiB, without the need to make the application to court. BRUs can last for between 2 and 15 years and have the same force and legal effect as a BRO.
Effect of bankruptcy restrictions
If you are subject to a Bankruptcy Restrictions Order or Bankruptcy Restrictions Undertaking you may not:-
The Accountant in Bankruptcy must record the existence of a Bankruptcy Restrictions Order (BRO), interim BRO or Bankruptcy Restrictions Undertaking (BRU) in the Register of Insolvencies.
Further information about bankruptcy restrictions can be found in the Bankruptcy Restrictions Guide on the Accountant in Bankruptcy website at www.aib.gsi.gov.uk
How does sequestration affect your job, business or public offices?
You will have to consider carefully how the sequestration is likely to affect your present or future employment.
Do I have to tell my employer?
You should check your contract of employment to see if there is a clause that states a requirement to inform the employer about debts and sequestration. If there is no clause then there is no reason for you to disclose the information, unless you consider that your employer would deem it a breach of trust.
The employer’s attitude to sequestration may be negative because s/he does not understand what the procedure means. You should encourage the employer to seek advice about sequestration, to gain a better understanding of the process and so be reassured that sequestration is a positive and constructive step for you.
Jobs and offices that a sequestrated person cannot hold
In most cases, you will not lose your job because of sequestration but may do so in certain jobs or lines of work, for example where there is a responsibility for handling money or work is for a security firm.
If you are in the armed forces and become sequestrated, you must tell your commanding officer and you may be discharged from the forces.
When you are sequestrated you cannot:-
When you become sequestrated, you may find it difficult to work for certain employers in the future, for example, the civil service, a security firm or other jobs where public service is involved, for example, in the ambulance service.
Your business
If you are self-employed as a sole trader the trustee can either:-
If the trustee thinks the business should continue s/he may delegate much of the running of the business to you. However, you would not be able to make important decisions without the approval of the trustee. You must trade under the name in which you were sequestrated and will be subject to credit restrictions which may make trading unfeasible.
You may be allowed to retain equipment, tools and vehicles that are necessary for you to continue in business (up to a maximum value of £1000). Profits from the business may be claimed by the trustee.
If you are a partner in a firm the situation is complicated. The trustee could pursue the partnership for assets to pay off your personal debts. If this was done by sequestration of the partnership it could in turn mean sequestration of the other individual partner(s) (for any debts arising from the sequestration of the partnership).
If you have a business and are facing insolvency, you should seek specialist financial advice.
Endnotes
www.nationaldebtline.co.uk/
www.citizensadvice.org.uk/
www.cccs.co.uk/
If sequestration is granted, the trustee has the power to sell some of your possessions, but you will not lose everything. You can keep many possessions and household goods, so that you or anyone living with you as part of the family can live without undue hardship. Specific items which can be kept are those which are exempt from attachment or exceptional attachment.
You should be aware that you can also keep any items that are essential for employment, i.e., joiner’s tools, but only to a maximum of around £1,000. You should discuss with the trustee what is essential for work, for example, a car. It may be difficult to argue a case for keeping some goods that are used for employment if they have a high value or require expensive insurance cover.
Most household items will not be sold. However, items which go beyond satisfying basic domestic needs such as antiques, or a car might be sold in sequestration.
It is possible for you, if you are in employment, to be allowed to keep a car if:-
- it is not economic for the trustee to sell it; and
- you need it to travel to/from work, or in the course of work; and
- you are making a contribution from earnings towards the debts.
The following list is the items that the AiB has NO INTEREST IN if they were to sell off your possessions.
Examples of essential items are the following items if used in the debtor’s home:
Beds, bedding, household linen and curtains
Food, cooking equipment and kitchen utensils
Refrigerators, washing machines and microwave ovens
Chairs, settees, tables and other furniture
Lights, fittings and heating appliances
Floor coverings
Articles used for cleaning, drying, mending or pressing clothes
Articles used for cleaning the house
Articles used for safety in the house
Tools used for maintenance or repair of the house and household articles
Computers and accessory equipment
Radios, telephones and televisions
Jointly owned possessions
If you are married or a civil partner the trustee may need to sell any jointly owned property. In these circumstances: -
- the trustee will approach your partner to try and agree a valuation of your share
- the trustee may offer the partner the opportunity to buy out your share
- if agreement is not reached the trustee can apply for a court order to sell the goods.
If the trustee claims that goods or possessions are jointly owned but your partner believes that they are hers/his alone, s/he should obtain proof of ownership and show this to the trustee. If s/he has no receipts, s/he should make a sworn statement (an affidavit) before a solicitor stating how s/he obtained the goods. If the trustee will not accept this, the partner will need to make an application to court to establish the ownership of the possessions.
If you are not married or a civil partner the only domestic possessions which can be sold are those belonging to you alone. Goods bought jointly cannot be sold: this includes goods bought jointly with a partner of either sex.
Any goods in the home that do not belong to you, for example, a spouse’s jewellery that was inherited, cannot be sold and do not become the property of the trustee. If the trustee does not accept that certain goods do not belong to you, the person claiming ownership may have to apply to court for an order preventing the trustee from selling the goods.
If you own goods jointly with a business associate they may be sold and the proceeds allocated to the relevant parties.
Gifts or Undervalued Sales
The trustee may enquire into all the gifts and sales made by you during the five years before sequestration. If the trustee can show that you were not solvent at the time of any gift or undervalued sale the trustee will be entitled to possession and if necessary may apply to the court for an appropriate order. For example, if you "sell" a car to your spouse or civil partner, for say £1,000 when it is worth £2,000, the trustee may apply to sell the car. The trustee would keep £1,000 for creditors, repaying the original purchase price of £1,000 to the spouse or civil partner. Fraudulent disposal of property is also a criminal offence. Special rules apply to your home.
Obtaining credit
If you are sequestrated, you must not obtain credit (alone or jointly) of more than £500 in a single transaction or over £1,000 in several transactions, without informing the lender that you are sequestrated. If you do not do this, you will commit a criminal offence. ‘Credit’ here means not only borrowing money to pay for goods or services but also any situation where you order goods or services on the basis that you are billed and pay later, for example house repairs. However, it doesn’t include credit agreements set up to repay utility supplies or council tax.
If you have been sequestrated, you may find it difficult to obtain credit facilities to pay utility bills or council tax through instalments in your own name without a guarantor. However, if you do have these arrangements, they will not be counted as credit for the purposes of calculating whether you have committed a criminal offence in obtaining credit.
You may have problems in obtaining a mortgage in future.
Opening a bank account
A sequestrated person may open a new bank or building society account so long as it does not have loan or overdraft facilities. You should inform the trustee that you are doing so. The trustee must inform the bank or building society of the sequestration and you may find that your existing bank account will be frozen or closed by your bank when the bank is notified of your sequestration. You may find it difficult to open a new bank or building society account, even if it does not have loan or overdraft facilities. If at any time the balance of the account is more than is necessary to meet the ‘reasonable’ needs of you and your family the trustee may take possession of the surplus.
What money will you have to live on?
Earned income
Income Payment Agreements (SPAs) and Income Payment Orders (IPOs)
If you are in employment you may keep your wage to live on. The trustee will seek to negotiate an Income Payment Agreement (IPA) with you. An IPA is a written agreement between you and the trustee, in which you agree to pay to the trustee a proportion of any income that you receive after sequestration. An IPA can be made without the involvement of the court and there aren’t criminal sanctions for defaulting. However, if you fail to make payments as agreed under an IPA, the trustee can apply to the sheriff to have the remaining payments due converted to an Income Payment Order (IPO) and such an application can be made before or after the date of your discharge.
If an agreement between you and the trustee is not possible or proves to be ineffective, the trustee may apply to the court for an Income Payment Order (IPO) requiring you to pay to the trustee a proportion of any income that you receive. The Order may also require a third party to pay income due to you straight to the trustee instead. An IPO must be applied for by the trustee before the date of your discharge (except in the case of a conversion from a failed IPA) and it can run for a period of up to 3 years from the date they are set up. It is a criminal offence to breach the terms of an IPO.
Benefits
When the client is not in employment, you should be allowed to keep the full benefit entitlement you receive.
Problems may arise where your benefit is paid directly into a bank account, since your accounts will be frozen as soon as the sequestration order is granted. Before applying for sequestration you should inform the DWP, so that, if necessary, alternative arrangements for payments can be made.
Social fund loans and benefits overpayments
The DWP can continue to recover social fund loans and other previously overpaid benefits from the benefits of a sequestrated person. This applies even if the social fund loan or overpayment was included in the sequestration.
If you cease to claim benefits, then the recovery of the social fund loan or overpaid benefit will be suspended until you make a new claim. If you have not made a new claim by the time you are discharged from the sequestration, any amount still outstanding will be written off.
Redundancy payments
If you lose a job after the date of sequestration any statutory redundancy payment or pay in lieu of notice belongs to you. If the employer makes any other payment about the loss of job (for example, under an employer’s redundancy scheme, or an ex gratia payment) this sum belongs to the trustee and will be passed on to creditors.
Settlements on divorce or dissolution of a civil partnership
If you have got divorced or have dissolved a civil partnership in the previous five years the trustee will investigate the terms of the divorce or dissolution settlement. If a capital sum or property transfer order was made up to five years before the sequestration, the trustee can ask the court to recall the order so that the money or property can pass to the creditors.
The court will not recall an order unless it can be shown that your liabilities exceeded assets at the time of the order or as a result of the order. The court will also consider the financial circumstances of your ex-partner. However, even if a divorce or dissolution settlement was made in good faith it can be overturned by a sequestration.
Private and occupational pensions
The effect of sequestration on your pension will depend on a number of factors.
If you are actually in receipt of a pension (of whatever kind) at the date of your sequestration, this income will not be transferred to the trustee, although the trustee will be able to seek a contribution for creditors from the income.
If you have a future entitlement to a pension these pension rights do not become controlled by the trustee and you cannot be forced to cash in the pension early for the benefit of creditors. This applies to almost all approved personal and occupational pensions.
If the pension comes into effect before you are discharged from the sequestration and you begin to receive an income from it, the trustee will be able to seek a contribution from this income for the benefit of creditors by way of an Income Payment Agreement (IPA) or an Income Payment Order (IPO). The trustee can seek a one-off contribution from any lump sum element of a pension.
If you are unhappy with any action by the court granting an IPO to the trustee for the income from your pension you should apply to the sheriff court for a review of the decision (endnote 2).
What happens if your income changes?
You should be aware that if you choose sequestration, any change in your income must be reported to the trustee. This means, for example, that if you have an unexpected generous pay rise, it will be up to the trustee to decide whether or not you can keep the extra income. The trustee will consider how much money you need for living expenses, and should take a realistic attitude to your needs. The court can also vary the proportion of income you can keep in the event of any increase or decrease in earnings following sequestration.
Any other money which you receives belongs to the trustee and will be passed on to creditors, for example:-
- money prizes
- sums inherited under a will. (if you are bankrupt it is advisable to tell friends or relatives of this if they are planning to leave you any property or money)
- income from savings or investments
- backdated benefit
- life assurance policy
- private pension
- certain payments after redundancy
- any assets acquired by you before you are discharged from sequestration may be claimed by the trustee.
Past actions which may become a criminal offence under Sequestration
You may have committed a criminal offence, if, up to one year before your sequestration :-
- Your liabilities exceeded your assets and you:-
sold assets for less than full value; or
gave assets to a creditor as security for existing debts where this was unfair to other creditors
- You knowingly made a false statement to a creditor or anyone involved in running your affairs
- You or anyone acting on your behalf (with or without authority) destroyed, damaged, concealed, disposed of or removed from Scotland any of your assets or related documents
- You or anyone acting on your behalf (with or without authority) falsified any document relating to your financial affairs
- You were in business and sold, or gave a security over, any item which had been bought on credit and not yet paid for.
You will be guilty of a criminal offence if, during or after sequestration, you:-
- are abroad when the sequestration takes place and fail to return when ordered to do so by the court
- fail to inform the trustee as soon as you are aware that documents, or claims submitted, relating to your estate have been falsified
- have debts of less than £1,000 and take credit of over £500 in a single transaction or £1,000 over several transactions, without firstly telling the creditor that you are sequestrated or subject to bankruptcy restrictions in England, Wales or Scotland
- have debts of £1,000 or more and take credit of any amount without firstly telling the creditor that you are sequestrated or subject to bankruptcy restrictions in England, Wales or Scotland.
- fail to comply with the instructions of the trustee or sheriff, or fail to give the trustee any property or perishable goods when asked
- fail to submit a list of assets and liabilities when asked to do so
- fail to notify the trustee of a change in financial circumstances
- are aware that more than one application for sequestration has been made and fail to make this known
- fail to notify that you are possibly a beneficiary under a will or are likely to come into money in some other way.
If you were sequestrated in Scotland, you will be deemed to have committed one of the criminal offences relating to sequestration if the offence took place anywhere in the UK, not just in Scotland.
Restrictions after discharge
Bankruptcy Restrictions Orders (BROs)
A Bankruptcy Restrictions Order (BRO) is a way of imposing a variety of restrictions on a sequestrated person for a period of time following her/his discharge from the sequestration. The Accountant in Bankruptcy (AiB) will make an application for a BRO when a debtor’s conduct has been dishonest or blameworthy in some way in relation to the sequestration.
An application for a BRO is made by the Accountant in Bankruptcy to the sheriff court and must usually be made after the date of sequestration but before the date of discharge from sequestration.
In deciding whether to grant a BRO, the sheriff can consider the conduct of the debtor both before and after the date of sequestration but must not take into account any conduct of the debtor before 1st April 2008. Examples of the conduct which the sheriff will take into account when considering an application for a BRO include:-
- failure to keep or produce records that would explain a loss of money or property by the sequestrated person where the loss occurred in the two year period preceding the petition onwards
- failure to keep records demanded by the AiB or trustee
- disposing of assets for less than their full value
- giving an unfair preference to a creditor
- making an excessive pension contribution
- failure to supply goods or services which were wholly or partly paid for
- incurring debts prior to the date of sequestration which you have no reasonable prospect of being able to pay
- carrying on any gambling, speculation or extravagance which may have contributed to or increased the extent of your debts
- causing debts to increase by neglecting business affairs
- failure to co-operate with the AiB, or trustee
- fraud or breach of trust.
Interim Bankruptcy Restrictions Orders
In some cases, if it is thought to be in the public interest, the Accountant in Bankruptcy may apply to the sheriff court for an Interim Bankruptcy Restrictions Order (BRO) to be made. An interim BRO would cover the period of time between the application for the full BRO being made and the decision being made by the sheriff. An interim BRO has the same effect as a full BRO. Where an interim BRO is followed by a full BRO, the duration of the full BRO starts from the date that the interim BRO was made.
Bankruptcy Restrictions Undertakings (BRUs)
A Bankruptcy Restrictions Undertaking (BRU) is very similar to a Bankruptcy Restrictions Order (BRO). The main difference is that it is formed by agreement between the debtor and the AiB, without the need to make the application to court. BRUs can last for between 2 and 15 years and have the same force and legal effect as a BRO.
Effect of bankruptcy restrictions
If you are subject to a Bankruptcy Restrictions Order or Bankruptcy Restrictions Undertaking you may not:-
- get credit of £500 or more without disclosing to the credit provider that you are subject to bankruptcy restrictions; or
- get credit of any amount without disclosing to the credit provider that you are subject to bankruptcy restrictions, if, at the time of the credit application, you have debts of £1,000 or more; or
- be appointed as a receiver or act as an insolvency practitioner; or
- be a Member of Parliament, local councillor or a Justice of the Peace
- act as the director of a limited company or take part in its formation, promotion or management, without permission from the court.
The Accountant in Bankruptcy must record the existence of a Bankruptcy Restrictions Order (BRO), interim BRO or Bankruptcy Restrictions Undertaking (BRU) in the Register of Insolvencies.
Further information about bankruptcy restrictions can be found in the Bankruptcy Restrictions Guide on the Accountant in Bankruptcy website at www.aib.gsi.gov.uk
How does sequestration affect your job, business or public offices?
You will have to consider carefully how the sequestration is likely to affect your present or future employment.
Do I have to tell my employer?
You should check your contract of employment to see if there is a clause that states a requirement to inform the employer about debts and sequestration. If there is no clause then there is no reason for you to disclose the information, unless you consider that your employer would deem it a breach of trust.
The employer’s attitude to sequestration may be negative because s/he does not understand what the procedure means. You should encourage the employer to seek advice about sequestration, to gain a better understanding of the process and so be reassured that sequestration is a positive and constructive step for you.
Jobs and offices that a sequestrated person cannot hold
In most cases, you will not lose your job because of sequestration but may do so in certain jobs or lines of work, for example where there is a responsibility for handling money or work is for a security firm.
If you are in the armed forces and become sequestrated, you must tell your commanding officer and you may be discharged from the forces.
When you are sequestrated you cannot:-
- be a company director, unless the court gives permission for this. The trustee will only allow the continuation of an existing business if it will benefit creditors
- be an estate agent. You can only be involved in any estate agency work as an employee of another person and you must not be involved in managing or letting property, surveying or evaluation
- act as a solicitor or work as an accountant. This is because of the rules regulating these professions. For example, sequestration automatically suspends the practising certificate of a solicitor, (although you can apply to the Law Society for the suspension to be lifted).
- be a local councillor
- be a Member of Parliament in Westminster (MP) or the Scottish Parliament (MSP)
- be a Justice of the Peace
- be involved in running a charity
- have a continuing power of attorney over someone else’s financial affairs
- be an Approved Money Adviser under the Debt Arrangement Scheme.
When you become sequestrated, you may find it difficult to work for certain employers in the future, for example, the civil service, a security firm or other jobs where public service is involved, for example, in the ambulance service.
Your business
If you are self-employed as a sole trader the trustee can either:-
- take over the running of the business; or
- grant a license to an individual other than yourself to operate the business; or
- sell the business as a going concern; or
- close it and sell the assets.
If the trustee thinks the business should continue s/he may delegate much of the running of the business to you. However, you would not be able to make important decisions without the approval of the trustee. You must trade under the name in which you were sequestrated and will be subject to credit restrictions which may make trading unfeasible.
You may be allowed to retain equipment, tools and vehicles that are necessary for you to continue in business (up to a maximum value of £1000). Profits from the business may be claimed by the trustee.
If you are a partner in a firm the situation is complicated. The trustee could pursue the partnership for assets to pay off your personal debts. If this was done by sequestration of the partnership it could in turn mean sequestration of the other individual partner(s) (for any debts arising from the sequestration of the partnership).
If you have a business and are facing insolvency, you should seek specialist financial advice.
Endnotes
- Monklands D.C. v McAllister, Airdrie Sheriff Court, 19 November 1991
- Accountant in Bankruptcy Guidance notes s6.18,l for the post April 2008 reforms at www.aib.qov.uk
www.nationaldebtline.co.uk/
www.citizensadvice.org.uk/
www.cccs.co.uk/
You have to fight, fight and fight again just to get what's yours.
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Comments
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Just bumping this up.You have to fight, fight and fight again just to get what's yours.0
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Just bumping this up again!You have to fight, fight and fight again just to get what's yours.0
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Thanks again for the info.Beneficial Claims / We Fight Any Claim / Money Worries / Yes Loans are all the same Scam company.
Do not do business with any of them!!0 -
Just bumping this up again!You have to fight, fight and fight again just to get what's yours.0
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Bumping this up.You have to fight, fight and fight again just to get what's yours.0
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Bumping this one!0
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Bumping this up the list!!!You have to fight, fight and fight again just to get what's yours.0
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Bumping this up the list!!!You have to fight, fight and fight again just to get what's yours.0
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