Will You Lose Your Home If You Are Sequestrated In Scotland?

**

Equity is what usually decides the outcome. Where there is little or none, there is little for a trustee to realise and the conversation changes.

Nobody should decide this from a web page, including this one. How sequestration works is the overview, and what follows is what the Act actually says about a home.

**

Does your home pass to the trustee?

Yes. Your estate is sequestrated on the date of the award and your right or interest in heritable property forms part of it.

Passing is not the same as selling

Vesting gives the trustee your right or interest. What happens to it next is governed by the family home provisions rather than by an immediate power of sale.

The trustee’s job is to recover, manage and realise the estate for the creditors. What a trustee in sequestration does sets out the office and its limits.

What the trustee looks at first

The question is what your interest is worth once the secured lending is deducted. That single figure drives almost everything else in this article.

It is worth working it out honestly before the appointment rather than hoping. A trustee will reach their own view of it early in the case.

Owning property closes one route entirely

Section 2(2)(e) bars the Minimal Asset Process where you own land, so a homeowner applying as a debtor is normally in a full administration case.

That is a flat bar rather than a matter of value. Whether you can use a Minimal Asset Process if you own property covers the point in full.

Can the trustee sell it without your agreement?

Not a family home. Section 113 is the gate, and section 112(3) refers to the trustee commencing proceedings to obtain the authority of the sheriff under section 113(1)(b).

Whose consent, and it is not only a spouse’s

The consent is that of a spouse, civil partner, former spouse or former civil partner living there. Where none of them occupies the home and you live there with a child of the family, section 113(7) makes it your own consent that is needed.

So a lone parent is not outside these provisions, which is how they are often described. National Debtline’s Scottish bankruptcy guide sets the family home rules out at length.

A child of the family is defined widely and includes a grandchild, and a person brought up or accepted as a child of yours, whatever their age. Take your title and your household circumstances to a money adviser before you apply.

What the sheriff can do if consent is refused

Section 113(2) lets the sheriff refuse the application outright, postpone it for a period not exceeding three years, or grant it subject to conditions. It is not a rubber stamp.

The sheriff has to weigh the needs and financial resources of your spouse, former spouse, civil partner or former civil partner and of any child of the family, the creditors’ interests, and how long the home has been lived in.

A cohabiting partner who is not a spouse or civil partner has no consent of their own under this section, though their needs can still be part of the picture. They should take their own advice early.

That matters most where the property is jointly owned. Citizens Advice Scotland’s bankruptcy pages are a starting point, and a free adviser can look at the title itself.

What is the three-year rule for the family home?

At the end of three years beginning with the date of sequestration your right or interest ceases to form part of the estate and is reinvested in you, with no conveyance or other transfer needed. Section 112(2) does it automatically.

Nine things the trustee can do to stop it

Section 112(3) is what makes the three years a long-stop rather than a guarantee. A trustee who has done any one of those things keeps the interest in the estate.

Sections 112 and 113 have both been in force since 30 November 2016 and neither has been amended since. The periods in them are the periods that apply today.

Section 112(6) also lets the sheriff substitute a longer period on the trustee’s application, and section 112(7)(a) lets Ministers prescribe a shorter one.

When the clock starts

The three years runs from the date of sequestration, not from your discharge. In a full administration case that means it is still running two years after you are discharged.

That is the single most useful date to write down. Everything the trustee can do to the property is measured from it.

Do not read it as keeping your home after three years

The provision returns whatever interest is left in the estate at that point. It says nothing about whether the property has been sold in the meantime.

The honest way to put it is that the trustee has three years to act unless the sheriff gives longer. What happens inside those three years is the part that decides your case.

What happens if there is little or no equity?

There may be nothing worth realising, and the Act provides a route to agree terms instead of waiting for the clock.

The agreement route in section 112(4)

Section 112(4) lets you and the trustee agree that you incur a specified liability to the estate in return for the interest reverting to you.

That is the statutory version of buying the interest back. The amount is a matter for the agreement and no figure is published anywhere.

Two commercial pages in this market print £550 for it and attribute the figure to guidance neither of them cites. Ask your trustee what would be proposed in your own case.

Where the property is co-owned

Only your own right or interest is sequestrated. The other owner’s share is not part of your estate, though a sale would still have to deal with the whole property.

That is why a co-owner buying out your interest comes up so often in practice. Section 112(4) is the mechanism the Act provides for agreeing something along those lines.

What nobody publishes

No regulations set out how a home is to be valued for any of this, and mygov.scot’s guide to assets in bankruptcy does not fill the gap either.

So treat any confident arithmetic about your equity as an estimate. A current valuation and an up-to-date redemption statement are the two documents worth having before the appointment.

Does sequestration stop your mortgage lender?

No. Section 145(5) says discharge does not affect any right of a secured creditor to enforce the security, even for an obligation you have been discharged from.

The personal obligation and the security are different things

Discharge under section 145(1) frees you from the debts you owed at the date of sequestration. Which debts are not written off covers the exceptions, and the security is not one of them.

The lender keeps its right to enforce against the property. Sequestration is not a mortgage holiday and the payments falling due afterwards are yours.

Arrears are a separate problem

Mortgage arrears that existed at the date of sequestration are debts in the sequestration like any other. The right to enforce the security is what survives, not the personal obligation.

So the arrears question and the security question have different answers, and it is worth asking about both. A free adviser can take the arrears up with the lender separately.

Where a repossession leaves you

Anything realised above the secured debt belongs to the estate rather than to you. Where the proceeds fall short, whether the shortfall is caught by your discharge depends on when you became liable for it.

That is a question to put to your money adviser with the paperwork in front of them. It turns on the dates rather than on the label the lender uses.

Arrears are a separate conversation from the sequestration itself. mygov.scot and a free money adviser can both help you take it up with the lender.

How do the deadlines line up with your discharge?

They do not. Your discharge and the home clock start on the same day and finish two years apart.

Four clocks, four end dates

Being discharged at twelve months does not return your home to you. Whether discharge ends everything is the article on that, and how long sequestration lasts sets out each period.

Who decides what

What should you do before you apply if you own property?

Get the equity valued, find out who would have to consent, and price the alternatives on the same facts. These decisions are hard to unwind.

The alternatives treat a home very differently

A Debt Payment Programme is not an insolvency solution. You repay the debt in full, and what changes is the pressure rather than the balance.

Whether the Debt Arrangement Scheme is better if you own your home compares the two properly, and what happens to home equity in a trust deed covers the third option.

If someone else lives there

A partner, a former partner or a child of the family changes what the trustee can do and what the sheriff would weigh. Their position is not the same as yours.

Where a home is jointly owned, the other owner should get their own advice rather than relying on yours. Whether you lose your home in a trust deed and whether you lose it in a Debt Arrangement Scheme both come up in the same conversation.

Questions to take to the appointment

• What is the property worth today, and what is left on the secured loan.
• Whose name is on the title, and who lives there.
• Whether a section 112(4) agreement is realistic in your case.
• What the trustee would be expected to do, and when.

Money advice is compulsory before any debtor application in any event, and how you apply sets out the sequence.