Bankruptcy and Diligence etc (Scotland) Act 2007
The Bankruptcy and Diligence Etc (Scotland) Act 2007 (Commencement No 3, Savings and Transitionals) Order 2008 comes into effect on 1st April 2008 and implements specific parts of the Bankruptcy and Diligence etc (Scotland) Act 2007 (“The Act”).
There are a number of changes affecting both bankruptcy and diligence, and these are summarised below :
Bankruptcy:- Debtor applications for sequestration will be dealt with by the Accountant in Bankruptcy. Creditor petitions will be presented to the appropriate Sheriff Court. The Court of Session will no longer award or recall sequestrations.
- The discharge period for debtors subject to sequestration has been reduced from 3 years to 1 year.
- The threshold for the raising of a Petition for Sequestration by a qualified creditor or creditors has been increased from £1,500 to £3,000.
- The threshold for debtor led applications remains at £1,500.
- Any creditor raising a petition for sequestration must have issued a Debt Advice and Information Package (DAIP) not less than 2 and not more than 12 weeks prior to presentation.
- Debtors subject to sequestration will make contributions from income if possible, by way of Income Payment Agreements or Orders.
- The Order brings into operation Bankruptcy Restriction Orders, to be imposed on debtors who do not co-operate with their trustee or who misbehave before or during their period of bankruptcy
- Applications for sequestration by ‘Low Income, Low Asset’ (LILA) debtors are introduced.
The Bankruptcy (Scotland) Act 1985 (Low Income, Low Asset debtors etc) Regulations 2008 also come into effect on 1st April 2008 and they provide that any debtor making a LILA application must have a weekly income not exceeding £220.80 (the National Minimum Wage for a 40 hour working week). The debtor must not own any land or property and can own assets not exceeding £10,000, on the condition that no single asset exceeds £1,000 in value. A person in receipt of an income related benefit or on income based Job Seekers Allowance is to be treated as having no income for the purposes of this section. There are a number of reforms introduced in relation to the granting of Trust Deeds, supported by the introduction of the Protected Trust Deeds (Scotland) Regulations 2008.
Diligence on the Dependence:The introduction of Part 6 (with some exceptions) introduces new processes for diligence on the dependence and there are several legislative changes which will affect Officers of Court in particular.
- Warrants for inhibition or arrestment on the dependence of an action can now be granted by the Sheriff Court as well as the Court of Session and a hearing will be held to consider the granting of such a warrant
- The new diligence of Interim Attachment is introduced. This enables creditors to attach certain tangible assets of debtors on the dependence of a court action. This remedy is not available under summary warrant.
Part 9 is introduced in its entirety. This regulates the new procedures in relation to diligence against earnings and introduces the following requirements:
- The obligation on the creditor to provide the debtor with a debt advice and information package within the 12 week period prior to service of the Earnings Arrestment Schedule
- Amendments to the treatment of holiday pay in the calculation of deductions from earnings
- Specific obligations on employers and creditors to provide information under the new earnings arrestment processes.
An employer receiving an earnings arrestment schedule must intimate a copy of it to the debtor and notify the debtor of the date on which the first deduction is made and the value of the sum deducted. On an annual basis, employers must provide a statement to each employee subject to an earnings arrestment and to the creditor containing information in relation to sums deducted, dates of deduction, etc. There are sanctions to be levied against employers failing to comply with these requirements and these could result in financial penalties being imposed.
The employer is also obliged to notify the creditor when an employee subject to an earnings arrestment leaves his employment and to provide the identity of the debtor’s new employer, where known.
A creditor receiving payment under an earnings arrestment is also obliged to provide annually to the employer detailed information in relation to the earnings arrestment.
There is a duty on a debtor subject to an earnings arrestment to give notice to a creditor when leaving employment and to provide the name and address of the new employer.
Other Diligence ReformsThe Act introduces the requirement to serve a Charge for Payment prior to the execution of any diligence under a Summary Warrant. This includes the requirement to serve a Charge for Payment prior to the execution of a funds arrestment, as introduced by Section 206 of the Act.
Part 12 introduces Time to Pay Directions and Time to Pay Orders into the Summary Warrant procedure for Local Authorities.
Maills and Duties and Sequestrations for Rent are both abolished by the introduction of Part 11 of the Act.
Transitional ArrangementsThe changes to bankruptcy do not affect petitions presented prior to 1st April 2008.
None of the provisions affecting earnings arrestments, current maintenance arrestments or conjoined arrestment orders are to apply to any such arrestment executed before 1st April 2008. These arrestments may be executed up until 22nd April 2008 without the requirement for prior issue of a DAIP.
For summary warrants granted prior to 1st April 2008, there is no requirement to serve a Charge for Payment for any diligence executed before 1st July 2008. Summary warrants granted after 1st April 2008 will be subject immediately to the requirement to serve a prior Charge for Payment.
Further InformationThe new Debt Advice and Information Package is available on the Accountant in Bankruptcy’s website, as is the proposed timeline for implementation of the remaining provisions of the Bankruptcy and Diligence Etc (Scotland) Act 2007. They can be found at: www.aib.gov.uk
