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 money attachment
no interim attachment
no attachment of estate
Creditors will be aware by searching:
Register of insolvencies
(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