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BANKRUPTCY & DILIGENCE (SCOTLAND) ACT 2007
On 1 April 2008, the following sections of the Bankruptcy & Diligence (Scotland) Act will be introduced:
- Part 1 – Bankruptcy
- Part 6 - Diligence on the Dependence
- Part 7 - Interim Attachment
- Part 9 - Diligence Against Earnings
- Part 12 - Summary Warrant, Time to Pay and Charges to Pay
- Section 208 - Abolition of Sequestration for Rent and Landlord's Hypothec.
A brief overview of the changes is detailed below. This bulletin is intended as introduction and further detailed briefing notes note on each of these areas will follow over the course of the next 3 weeks.
Part 1 – Bankruptcy
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Debtors will be automatically discharged after 1 year, (as opposed to the current 3 year period).
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Debt lower limit increased to £3000 (from £1500).
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Petition and recalls must be raised at Sheriff Court. Court of Session jurisdiction restricted to dealing with actions of reduction and suspension.
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Introduction of Bankruptcy Restriction Orders and Bankruptcy Restriction Undertaking which may be imposed for periods from 2-15 years.
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Heritable property to automatically re-vest in debtor after 3 years unless trustee has taken certain action.
Part 6 - Diligence on the Dependence
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The Sheriff Court will have jurisdiction to grant pre-decree inhibitions. Statutory test introduced which creditor has to satisfy before court will grant pre-decree inhibition or arrestment.
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Where pre-decree inhibition/arrestment is executed before writ served, writ must be served within 21 days, or diligence will cease to have effect. Provision to apply to Court for an extension.
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Where pre-decree inhibition/arrestment is granted without an initial hearing, Court must fix a hearing of which debtor must be notified.
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Where arrestee is a bank and the customer is an individual (not a company, partnership, or trading account), bank will be required to deduct minimum payment level, currently £370 from sums arrested.
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Court given the power to limit property covered by a pre-decree inhibition and can limit the sums to be attached under a pre-decree arrestment.
Part 7 - Interim Attachment
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This is a new type of diligence of the dependence.
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Attachment is currently available once decree has been obtained. This will now be available pre-decree where statutory test is satisfied.
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Excludes items in dwelling houses so on a practical level would only apply to goods in business premises and cars worth more than £1000 which are not subject to a hire purchase agreement.
Part 9 - Diligence Against Earnings
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New duties on employer, creditor and debtor to provide information within certain timescales, mainly relating to sums received, balance outstanding and new employment details.
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Initial reporting required by employer, followed by annual reporting.
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Banks will have duties to provide information whether as creditor or employer and will require to ensure reporting systems are in place.
Part 12 - Summary Warrant, Time to Pay and Charges to Pay
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A statutory test is introduced with factors the court must take into account in considering a time to pay application.
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One of the factors is any steps taken by a bank in assisting the debtor to repay the debt.
Section 208 - Abolition of Sequestration for Rent and Landlord's Hypothec
Further information
For further information please contact Ruari MacNeill 0131 625 7279 Andrew Lothian or Claire Martin 0131 625 7285 in the Dispute Resolution Banking Team.
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