IT SEEMS likely indebtedness will become a bigger problem in the coming year..
In previous columns, I have tried to provide ideas and solutions to debt problems to prevent people finally taking the most extreme measure of bankruptcy.
I want to focus on the two ways individuals can become formally bankrupt in Scotland: se
questration and taking out a protected trust deed (PTD).
Sequestration is instigated by the creditor, while PTDs are at the instigation of the debtor. Bankruptcy – or sequestration to use its Scottish term – is not something that anyone should undertake lightly.
But for some, and the latest figures show that it affected 13,814 people in Scotland in 2007, it can be the only option.
They will have exhausted the possibilities of extending credit and borrowing against equity and loans, finding it is the only plausible solution.
Latest figures show that, in the fourth quarter of 2007, there was an 11.4 per cent fall in the number of PTDs and a 1.2 per cent rise in sequestrations compared with the third quarter of 2007.
Sequestration can be awarded against the estate of an individual, a partnership, a limited partnership, a corporate body or an unincorporated body such as a club.
The creditor claims against the estate of the debtor.
This estate includes heritable and moveable property, money due to the debtor, the right to receive money or goods at some time in the future and any surplus income during the period of sequestration. A trustee is appointed to oversee the process
The debtor is required to cooperate with the trustee and is discharged from bankruptcy after three years, although this can be deferred by the court in certain circumstances.
A permanent record of the process is kept by the trustee and is available for inspection by any interested parties. The practical consequence of sequestration is that it restricts an individual from obtaining credit for at least the three-year period of the bankruptcy, but may also impact on their future access to credit for some years.
Sequestration will also restrict the ability of an individual to buy a car if they use a loan, to extend or change their mortgage, to extend or change their overdraft facility at a bank, or to change their bank account, and to purchase anything which requires a credit check.
Therefore, sequestration should be a last resort.
Unfortunately, it is likely to be a decision that a growing number of Scots may be forced to make in the coming year.
• Bryan Jackson is a corporate recovery partner with accountants and business advisers PKF.
The full article contains 446 words and appears in The Scotsman newspaper.
