The legislation is expected to come into force some time next year to help introduce a “Financial Health Service” for Scotland, providing a modern system of debt advice and debt management.
The Bill is part of a “suite” of legislation by the Scottish Government to reform statutory debt solutions which saw both the Debt Arrangement (Scotland) Regulations 2013 and the Protected Trust Deed (Scotland) Regulations brought into force in the course of last year.
The full text of the Bill as it has been passed is available at:-
http://www.scottish.parliament.uk/S4_Bi ... 0(Scotland)%20Bill/b34bs4-
The Bill covers a number of different areas and is split into sections under the following broad subject headings:-
• Advice and education
• Payments by debtor following sequestration
• Sequestration where debtor has few assets
• Moratorium on diligence
• Application for sequestration
• Administration of estate
• Discharge following sequestration
• Functions of sheriff and Accountant in Bankruptcy in sequestration
• Review of decisions made by Accountant in Bankruptcy
Key Changes introduced in the Bill
The Bill will introduce, among other things, the following changes:-
• Debtors must obtain mandatory advice on their financial circumstances and the effect of proposed sequestration (bankruptcy) from an approved money advisor before applying for their own sequestration. A declaration to the effect such advice has been given must be provided by the money adviser in the bankruptcy
Bankruptcy and Debt Advice (Scotland) Bill Legal Update
• Debtors whose financial history and circumstances identify them as being particularly vulnerable to problems arising as a result of recurring debts will be required to receive a course of targeted financial education. The criteria for this are set out in the Bill.
• The introduction of a common financial tool to assess the debtor’s income, the amount allowed for
expenditure and the amount (if any) of the debtor’s contribution in a sequestration.
• The creation of a new Debtor Contribution Order together with the introduction of a standard 4 year period for
contributions to be made from the debtor’s income following sequestration. There will also be the power for the trustee to seek a variation to reduce or increase the contribution amount. Furthermore, a mechanism will be provided for contributions to be deducted directly from earnings.
• The provision of a new route into bankruptcy known as the “Minimal Asset Process” for debtors with limited assets. This will replace the existing low income, low asset route. The new route allows for discharge of the debtor after a period of only 6 months. The new process will however be subject to eligibility criteria and
restrictions including a post- bankruptcy restriction for a period of 6 months.
• Where a debtor gives notice of his intention to apply for sequestration, a protected trust deed or a debt payment programme there will be a moratorium on diligence for a period of 6 weeks. This also applies to bodies such as trusts and partnerships which are capable of being sequestrated.
• An extension of the period of time during which “acquirenda” (property or rights acquired by the debtor after his sequestration) vests in the trustee for the benefit of creditors from the current 1 year period to 4 years.
• A requirement for trustees to report on the debtors assets, liabilities and financial/business affairs, the debtor’s conduct in relation to these and his conduct during the sequestration. The Accountant in Bankruptcy will have the power to refuse (or grant) the discharge. This will replace the current procedure whereby a
trustee must apply to a sheriff to seek a deferral of automatic discharge.
• It will no longer be necessary to advertise bankruptcy awards or appointment of replacement trustees in the Edinburgh Gazette. Instead, the Accountant in Bankruptcy shall arrange for this information to be published in the Register of Insolvencies.
• There is provision for various administrative procedures to be removed for the remit of the sheriff courts and
transferred to the Accountant in Bankruptcy.
It is anticipated that the legislation shall be brought into force around April 2015.
Thanks to McClure Naismith for this update
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