The Bankruptcy and Debt Advice (Scotland) Bill was introduced in the Scottish Parliament on 11 June 2013.
This Bill only applies in Scotland but will also be of interest to those clients in England who operate across border.
The Bankruptcy & Debt Advice (Scotland) Bill follows up the consultation on Scottish bankruptcy law reform led by the Accountant in Bankruptcy (AiB), whose stated aim was to provide a 'financial health service' with a focus on rehabilitation balanced against individual debtors taking responsibility. The AiB is a public appointee responsible for administering the process of personal bankruptcy and recording corporate insolvencies in Scotland.
The Bill contains a number of innovations, most notably:
- compulsory money advice for any debtor considering applying for their own bankruptcy
- a moratorium against enforcement action where notice is given of an intention to apply for bankruptcy or for a protected trust deed or debt payment programme under the Debt Arrangement Scheme legislation
- provision for compulsory financial education in specified cases, such as where a debtor has repeatedly had recourse to bankruptcy procedures or where they are subject to a Bankruptcy Restrictions Order
- a proposal to introduce a common financial tool specific to Scotland in order to assess an appropriate amount of the debtor's income to be paid over to the trustee
The Bill also introduces a number of provisions which work in favour of creditors, with a view to maintaining the balance between effective enforcement and debtor protection. For example:
- the Bill extends the period during which an asset acquired by the debtor post-bankruptcy will vest in the trustee to four years. The Act presently reinvests such assets at the date of the debtor's automatic discharge, which is generally one year
- a new provision provides that where a debtor cannot be traced, his automatic discharge is deferred indefinitely, thereby preventing such a debtor from being released from his debts without engaging in the process
- another new provision enables the AiB to reappoint a trustee if assets are discovered after the date of the trustee's discharge where those assets would have formed part of the bankrupt's estate, clearing up an uncertainty in the existing law
The role of the AiB
The most striking aspect of the Bill, however, is the enhanced role which the AiB will play in the administration and oversight of bankruptcy in Scotland. A number of functions that had previously been exercised by the Courts are proposed to be transferred or shared with the AiB (at least at first instance). These include:
- recall of bankruptcy will be granted by the AiB in certain circumstances
- the AiB will be able to remove a trustee from office and appoint a replacement trustee directly
- power to make Bankruptcy Restrictions Orders will lie with the AiB
- the AiB will have the power (upon application being made to her) to convert a protected trust deed to a sequestration
- the power to cure defects in procedure in certain specified circumstances will also be transferred from the Sheriff Court to the AiB
The Bill as introduced appears to reflect the outcomes of the consultation process. Creditors will welcome some of the more robust provisions regarding recovery of assets and the consequences of failure by debtors to cooperate in the process.
The focus on education and rehabilitation will also be welcomed by many creditors, particularly those in the financial services sector for whom TCF requirements have become part of the culture.