Bankruptcy and Debt Advice (Scotland) Act 2014 Commences
April 2015

The Bankruptcy and Debt Advice (Scotland) Act 2014 came into force on 1 April 2015. According to the Scottish Government, the Act is designed to balance the rights of those in debt with the needs of creditors and businesses. The Scottish Government also consider this to be the latest element in the Scottish Government’s vision of a Financial Health Service for Scotland, which commenced with the launch of the Scotland’s Financial Health Service web portal in December 2014. The site is a one-stop shop for advice on a range of money issues, signposting users to organisations offering information and advice on debt, managing money, housing, homelessness and ethical lending.

The Bankruptcy and Debt Advice (Scotland) Act introduces a suite of measures, including the Minimal Asset Process, which offers debt relief quickly and at less than half the cost of an application for bankruptcy under the previous equivalent scheme for those on low incomes.

The measures in new legislation include:

  • Minimal Asset Bankruptcy Process that aims to offer debt relief quickly and at less than half the cost of an application for bankruptcy under the previous equivalent scheme for those on low incomes
  • Mandatory money advice for people seeking access to statutory debt relief instruments such as sequestration (the equivalent term in Scotland for bankruptcy) to ensure debtors are matched with the solution that best fits their needs and circumstances
  • Compulsory financial education for those who have been sequestrated more than once to help with their financial rehabilitation and prevent future financial difficulties
  • Introduction of a Common Financial Tool for money advisers, allowing them to quickly assess whether individuals can contribute towards repayment of their debts and what the level of their contribution should be
  • A new web-based bankruptcy application system
  • Creditors are obliged to submit claims no later than 120 days after notification by the trustee
  • A less publicised issue is the introduction of a moratorium on diligence where the debtor notifies the Accountant in Bankruptcy that he proposes to make a debtor application for sequestration, seek to fulfil the conditions for a trust deed to become protected or apply for approval of a Debt Payment Programme. The Accountant in Bankruptcy must record that notification in the Register of Insolvencies without delay. The moratorium lasts for 6 weeks from the date of that registration. During that time a creditor cannot serve a charge for payment, commence any diligence, or found on a debt owed by that person for sequestration. In addition funds cannot be released under any arrestment. In most cases, the prohibition will continue if the sequestration is granted, trust deed becomes protected or DPP is approved. This will require creditors to make further checks of the Register of Insolvencies but this is something AMA can undertake on behalf of clients.

So in future when considering the lodgement of a petition the ROI register will require to be checked as well as the DAS register.