Sequestration is the opposite. It is a statutory process, it binds every creditor whether they like it or not, and how it works is set out in an Act of the Scottish Parliament.

Almost every comparison you will find online is written for England and Wales, where the enforcement picture is different and the process is run by an official receiver. Scotland has neither.

One is a contract and the other is a statutory process. The Financial Conduct Authority’s own glossary calls a debt management plan a non-statutory agreement between a customer and one or more of the customer’s lenders.

Side by side

What is binding is your contract with the provider, not the plan itself. The creditors are not parties to it.

StepChange’s own client agreement says it in the client’s voice: creditors may continue collection activity including defaulting accounts, charging interest and taking legal action, and the charity will try to but cannot prevent it.

What the regulator’s definition also tells you

It requires a third party to administer the plan and distribute the money. So an arrangement you negotiate directly with creditors is outside the defined term, and what a debt management plan is goes into that.

It is also an agreement with one or more of your lenders. A plan can exist even where some creditors have refused to take part.

A debt management plan will not stop a wage arrestment. Nothing in Scots law attaches any consequence to one.

What sequestration does instead

An award of sequestration ends an earnings arrestment. Section 72(2) of the Debtors (Scotland) Act 1987 says an earnings arrestment, a current maintenance arrestment, a conjoined arrestment order or a deduction from earnings order ceases to have effect on the date of sequestration.

Section 72(4) then bars a fresh earnings arrestment for a debt that could be claimed in the sequestration.

That happens by operation of law under section 72(2) of the Debtors (Scotland) Act 1987. There is no application, no hearing and nothing for the creditor to agree to.

What a plan does about enforcement

A plan does not stop enforcement. It has no statutory effect on diligence at all.

StepChange says the same in one sentence: a plan is not based on Government legislation, so it does not protect you from legal action by your creditors.

There is a middle option that does protect you

The Debt Arrangement Scheme is statutory, and approval recalls an arrestment of your income. National Debtline’s Scottish guide says a debt payment programme is usually a much better option than a free debt management plan.

And if a deduction is already coming off your wages, whether a plan stops a wage arrestment sets out what does.

No creditor has to freeze interest because you are on a debt management plan. No statute requires it and no Financial Conduct Authority rule requires it.

What the Financial Conduct Authority does require

CONC 7.3.4 in the Handbook is a rule, and it has been in force since 4 November 2024.

What the Financial Conduct Authority does require is forbearance. Its rule at CONC 7.3.4, in force since 4 November 2024, says a firm must treat customers in or approaching arrears with forbearance and due consideration.

Suspending, reducing, waiving or cancelling interest is the first of the Handbook’s examples of what forbearance can look like. Those are examples in guidance rather than a duty to freeze.

That distinction is the whole answer and nobody else draws it. A creditor that keeps charging interest is not automatically breaking a rule.

Two limits that matter in Scotland

Those rules bind only firms the Financial Conduct Authority regulates. They do not reach your council for council tax, HMRC, or the Child Maintenance Service.

Those are exactly the debts most likely to produce a wage arrestment. National Debtline’s Scottish debt management plan guide puts the general position plainly: creditors do not have to freeze interest under a plan.

Sequestration deals with it a different way entirely

Section 145(1) discharges you from the debts and obligations you were liable for at the date of sequestration, subject to a short list of exceptions.

Section 145(3) lists what survives. Fines and other court penalties, any liability incurred by reason of fraud or breach of trust, and aliment or a periodical allowance payable on divorce are not written off.

So where discharge applies there is no balance left for interest to run on. Which debts are not written off covers the exceptions, and student loans survive by a separate route.

A plan can be free and so, in many cases, can sequestration. The larger cost in each case is what you pay towards the debts themselves.

The plan side

StepChange and Christians Against Poverty set plans up and run them free of charge.

National Debtline and Citizens Advice Scotland give free advice on whether a plan is the right answer, without administering one for you.

A commercial provider may charge, and there is no cap on what it may charge.

Both of those are worth saying plainly rather than editorialising about. Whether plans are free or charge fees sets out how each funding model works.

The sequestration side

The application fee is £150, and it is not payable if you receive certain prescribed benefits or the common financial tool shows you have no surplus income.

There is no fee to apply for Minimal Asset Process bankruptcy. The fee that used to apply was removed on 6 February 2023, and the Accountant in Bankruptcy’s own guidance lists no application fee.

A debtor contribution order is set using the common financial tool, so it is calculated from what your budget shows you can afford rather than from what you owe.

It normally runs for 48 months, which is longer than the twelve months to discharge. The payments carry on after you are discharged.

The two together

Which sequestration route you fall into changes the arithmetic substantially. Choosing between the two bankruptcy routes compares them.

A plan lasts as long as the arithmetic says. Sequestration has statutory end points, at six months for a Minimal Asset Process and twelve months at the earliest for full administration.

A plan has no term

It runs until the included balances are cleared, so the length is your total debt divided by your monthly payment. How a plan works sets out the mechanics.

The free plan National Debtline refers clients to screens on two questions: whether you can afford to pay at least £5 to each debt every month, and whether you can repay your debts within ten years.

Sequestration ends on a date, or a decision

Section 140(1) discharges a Minimal Asset Process debtor automatically at six months.

Discharge normally comes twelve months after the award.

It is a decision rather than a date. Sections 137 and 138 give a discretion exercisable at any time after twelve months, with a review and an appeal if it goes against you.

And neither ends everything at once

Discharge frees you from the debts it covers, but it does not end the sequestration. Your trustee carries on, a debtor contribution order carries on, and the estate is still being dealt with.

On a plan, StepChange’s client agreement says you can cancel at any time, by letter, email or phone. Stopping the payments does not stop the debts.

Only sequestration goes on a register. There is no register of debt management plans in Scotland, and the Accountant in Bankruptcy expressly excludes informal plans from its statistics.

The record, side by side

The April to June 2026 release, published on 22 July 2026, says non-statutory debt solutions are cases where debtors make their own arrangements with creditors or enter informal debt management plans through a debt management firm, and that these are not included.

That exclusion has a consequence worth knowing. No published figure exists for how many people in Scotland are on a debt management plan, from any source we could find.

The plan is invisible and the accounts are not

StepChange puts both halves of it in one place: nowhere in your credit report shows you are on a plan, but each account in it can show that payments are made through one.

The accounts inside a plan are consumer credit accounts held by lenders who report to the credit reference agencies, and they are being paid less than the contractual amount. That is ordinary account-status reporting rather than a plan being recorded.

What sets the retention period

Not law. No statute, no statutory instrument and no Financial Conduct Authority rule sets six years, and how sequestration affects your credit file covers the same question on the other side.

StepChange and Experian both give six years and disagree about when it starts. The two published positions do not reconcile and no source resolves them.

Check the date shown against each account on your own file rather than assuming which one applies.

Because the plan is regulated by a UK regulator and the alternatives to it are creations of Scots law. That is why so much of what is written about plans says nothing about Scotland.

What to watch for

• An official receiver. There is no such office in Scotland.
• A bankruptcy petition to a county court, or a bankruptcy order. A Scottish debtor applies to the Accountant in Bankruptcy and the outcome is an award of sequestration.
• Breathing Space. That is the England and Wales moratorium, and the Scottish equivalent is the statutory moratorium on diligence.
• An individual voluntary arrangement or a Debt Relief Order. Neither is available here.

What that looks like on the page

UK-wide guidance routinely tells a Scottish reader the official receiver will oversee their bankruptcy, and then offers application routes for England, Wales and Northern Ireland only.

The same page will often name sequestration earlier on. The Scottish mention survives and the Scottish process does not.

That is not carelessness so much as scale. A UK-wide page is written once, and the Scottish differences are the part that gets lost.

Which one is right for you

A plan suits somebody with a manageable surplus, no priority debt problem and no enforcement running. Sequestration suits somebody whose debts cannot realistically be repaid, and it is the only one of the two that stops an earnings arrestment.

Free advice is available from Citizens Advice Scotland, StepChange, National Debtline and Advice Direct Scotland, and the Debt Arrangement Scheme sits between the two and is often the option nobody mentioned.