Scotland has the Accountant in Bankruptcy where England and Wales have the Official Receiver and an adjudicator, and the Scottish process is called sequestration rather than bankruptcy.

Most of what is written about this comparison online is English, so it describes a system Scotland does not have. Whether sequestration is the same as bankruptcy in England sets out the differences.

Very little. Nothing in Scots law attaches any consequence to one, which is the single fact everything else follows from.

What that means in practice

A debt management plan is an informal arrangement rather than a statutory scheme. No Act of Parliament creates it, nothing prescribes its form, and it binds nobody by force of law.

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

It cuts both ways

Nothing binds you, so you can leave at any time, and nothing binds your creditors either. National Debtline’s Scottish guide says a debt management company cannot force creditors to accept offers, or freeze interest, and that creditors may still take court action.

The two side by side

There is no official count of them

The Accountant in Bankruptcy treats informal arrangements as non-statutory debt solutions and leaves them out of its statistics, so no published figure exists for Scotland.

Sequestrations are counted, because they are awarded. How sequestration works sets out the process.

It is awarded, not agreed. A debtor application goes to the Accountant in Bankruptcy, and a creditor petitions the court.

The thresholds

You need debts of at least £3,000 to apply for full administration sequestration, under section 2(8)(a) of the Bankruptcy (Scotland) Act 2016.

A creditor can petition to make you bankrupt where you owe at least £5,000 and are apparently insolvent.

The Minimal Asset Process is the low-asset track under section 2(2) of the same Act, and whether a plan or the Minimal Asset Process suits a smaller debt compares that route with an arrangement.

The money and the jurisdiction

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.

You must have been habitually resident in Scotland, or have had an established place of business here, at any time in the year before the application.

And there is no English machinery here at all

No Official Receiver, no adjudicator, no bankruptcy petition to a county court and no bankruptcy order. mygov.scot sets out the Scottish route, which pages ranking for this question often leave out entirely.

A plan has no application at all

Nobody grants an arrangement and nobody can refuse you one. What can be refused is each creditor’s agreement to the offer you make.

A plan repays them in full, slowly. Sequestration writes most of them off on discharge, and a short list survives.

What survives, and what does not

Section 145(3) lists what survives, and which debts are not written off goes through each of them.

Student loans are an exception by a different route

Student loans are not written off either, by a different route. Section 145(7) leaves the student loan regulations untouched rather than listing the debt as an exception.

They are not on the section 145(3) list, and pages that put them there are wrong about the mechanism even where the outcome is right.

A plan has no write-off mechanism at all

The only route to paying less is a full and final settlement each creditor agrees to in writing. How long a plan lasts sets out what repaying in full actually takes.

A plan touches none of them. In sequestration your estate vests in a trustee, and there is no protected amount of money.

The plan side

An arrangement covers unsecured balances. Your title, your car and your savings are outside it, and no trustee acquires any interest in anything.

That is the plan’s real advantage and it is worth naming plainly. It is bought by having no protection at all.

The sequestration side

There is no protected amount of savings. Section 88 exempts particular articles such as clothing and tools of trade, and it does not exempt money.

Income is treated differently from property

Income earned after sequestration belongs to you rather than the trustee, subject only to a debtor contribution order.

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.

Only sequestration. This is where the two are furthest apart, and it is the question this site exists to answer.

What the award does to each diligence

Section 72(2) of the Debtors (Scotland) Act 1987 ends an existing earnings arrestment on the date of sequestration, by operation of law and with no application to any court.

A plan reaches none of it

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

That is a checked absence rather than an oversight: no provision anywhere in Scots law attaches a consequence to an informal arrangement. Whether a plan stops a wage arrestment sets out what does.

And sequestration is not the only route that reaches one

Approval of a debt payment programme recalls an arrestment of your income or property, and a protected trust deed ends an earnings arrestment on the date of protection. When to move to a statutory solution compares them all.

Discharge from sequestration normally comes twelve months after the award, and it is a decision rather than a date. A plan has no term at all.

The Scottish point almost nobody makes

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 the decision goes against you.

And discharge is not the end of every obligation. For six months from the date of discharge from a Minimal Asset Process, section 146 requires you to tell anyone giving you credit that you are subject to its conditions, before taking credit of £2,000 or more or any amount at all while you owe £1,000 or more.

In England and Wales section 279(1) of the Insolvency Act 1986 says a bankrupt is discharged after a year. That is automatic and Scotland’s is not.

Discharge is not the end of the sequestration

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.

The categories the Accountant in Bankruptcy uses when it defers a discharge come from its own notes for guidance rather than from the Act.

A plan runs until the balances are cleared

There is no maximum and no expiry, and a plan of ten years or more is not unusual where interest has kept running. Whether a plan freezes interest explains why that happens.

Sequestration is public and reaches some jobs. A plan is invisible and reaches none, and that is the trade in one sentence.

The register

A sequestration appears on the Register of Insolvencies, which the Accountant in Bankruptcy keeps and anyone may inspect. A debt management plan appears on no register anywhere.

Your job

Acting as a company director, or taking part in promoting, forming or managing one, is a criminal offence for an undischarged bankrupt without the leave of the court, under section 11 of the Company Directors Disqualification Act 1986.

A short list of roles is closed to an undischarged bankrupt, each with a statute behind it, and which jobs sequestration affects sets them out. A plan closes none of them.

Your credit file

A sequestration is an insolvency entry. A plan is not recorded as an entry at all, and what shows is the state of each account inside it.

So the file consequences are different in kind rather than in degree. Whether a plan is better than sequestration weighs the whole choice.

How to decide

• Can you realistically clear the balances at all?
• Is anything already being enforced against you?
• What do you own, and what is it worth?
• Does a public register entry matter to you, and why?

And take the advice free

Citizens Advice Scotland, StepChange, National Debtline and Advice Direct Scotland all advise on both, and a money adviser has to be involved in a debtor application anyway. What a debt management plan is is the place to start on the informal side.