Bankruptcy and Debt Advice (Scotland) Act 2014

The following is a short bullet point note on Scotland’s new legislation.

(1) Policy aspiration of the AiB:

  • ensure those debtors who can pay their debts should pay;
  • creditors get the best return possible;
  • break the debt cycle through improved rehabilitation from debt problems
  • educating debtors to improve their financial awareness when dealing with financial matters.

(2) Key changes to take place:

  • individuals will no longer be able to bankrupt themselves without taking prior financial advice from approved money advisor thus ensuring best option is taken
  • financial education, ‘the financial wealth service’, compulsory for some debtors identified as valuable to recurring debts
  • to identify surplus income a ‘common financial tool’ will be a mandatory part of the advice process.  Therefore the same tool will be used by all money advisers to assess income, expenditure and identify surplus income available to contribute towards debts.
  • debtor will be required to pay the contribution determined by the common financial tool for a minimum of 48 months – this is 12 months longer than under current arrangements.  The idea is that:

such contributions are sustainable

increased payment time should increase creditor return.

  • a new ‘debtor contribution order’ to replace the IPO

debtors can apply for a six month payment break but will still                  have to make a minimum of 48 payments

  • delay in discharging debtor from bankruptcy if they do not sign a new ‘statement of undertaking’ or comply with its conditions, including payment of the contribution.  Therefore more co-operation from the debtor will be encouraged.
  • a new moratorium to be introduced across all statutory debt solutions.  Therefore debtors to be given a 6 week period of protection from creditor action.  The idea is to give the debtor some breathing space, allowing them to take debt advice.  During this period:

no arrestment

no money attachment

no interim attachment

no attachment of estate

Creditors will be aware by searching:

  AiB website

  Register of insolvencies

  DAS register

(3) Debtor discharge:

  • no automatic discharge except in minimum asset cases (MAP)
  • the trustee will apply for the debtor’s discharge – if not, trustee must explain why not to the debtor

debtor has a right of appeal to sheriff

  • possibility to re-open bankruptcy if after discharge it is discovered debtor estate would have been vested, e.g. debtor subsequently inherits assets or assets are discovered.

(4) Court time:

  • to free up court time miscellaneous admin processes currently carried out by the court to pass to the AiB including:

application by a trustee for a direction

recall of sequestration where debts can be paid in full

appointment of replacement trustee