The Bankruptcy and Diligence (Scotland) Bill introduces a number of measures which modify current diligence (judgment enforcement) measures, to either improve them or clarify some of their provisions.
However, perhaps of greatest impact to the credit industry will be the introduction of a mental health moratorium on debt recovery action should an individual have a mental illness.
The precise details will be introduced by regulations, although the Bill provides a non-exhaustive non-mandatory list detailing what those regulations may provide, including:
- The individual’s eligibility criteria for the moratorium to apply.
- The types of debt to which the moratorium will apply and the process for establishing the eligibility criteria.
- The moratorium’s timeframe, what creditors can do during its currency, including the ramifications for creditors should creditors breach the moratorium.
- The debtor’s obligations during the moratorium.
- How information can be recorded to establish whether a moratorium is in place.
Once the Bill is enacted, Scotland will be closely aligned with the English Mental Health Statutory Breathing Space. Such UK-wide consistency should be welcomed.
Other provisions of the Bill include the following:
- Clarifying the process for applying for a bankruptcy to be recalled should a debtor pay, or be about to pay, their debts in full.
- Where a debtor makes an application to the Accountant in Bankruptcy (as opposed to a court petition) either through the Minimal Asset Process or through the full administration process, then bankruptcy should be awarded without delay.
- A corrective provision which confirms that where a debtor makes a gratuitous alienation of an asset, a purchaser – in good faith and for value – will retain a good title to it.
- If a creditor carries out an arrestment, currently a third party, such as a bank, in whose hands the arrestment is carried out, is not obliged to advise the creditor if the arrestment has been unsuccessful and not attached any funds. Arrestees will now be required to inform the creditor within three weeks if nothing has been attached.
- Following an earnings arrestment, the debtor’s employer is obliged to advise the arresting creditor should the debtor leave their employment. It will now be a requirement that a specific form should be used to provide this notification. Should the employer fail to provide the information, then, on a creditor’s application to the court, a sheriff may order the employer to pay the creditor twice the amount which the creditor would have received had the arrestment be operational. The Bill provides that the amount should not exceed £500.
- If a creditor makes an application for diligence on the dependence (which may include an arrestment or inhibition), there may be a hearing prior to the provisional measure being granted. If there is a hearing and the debtor is an individual, then the debtor must be provided with a “debt advice and information package” in advance of the hearing. Failure to do so will mean that the creditor’s application will not be granted.
- Where an exceptional attachment order has been granted (removing non-essential assets from an individual debtor’s home), the attached goods must be immediately removed by the sheriff officer. However, if this is not practically possible, then seven days’ notice must be given, during which time the debtor can redeem the goods. This seven-day period is now to be increased to 14 days.
- Money attachment can only be carried out during certain hours (not before 8am and not after 8pm), nor on Sundays and public holidays. The Bill amends these restrictions should the debtor be carrying on a trade or business from the premises outwith these hours.