Personal insolvency in Scotland update

Over the last 12 months, there has been a lot of focus on the personal insolvency regime in Scotland with the Scottish Government concerned about the financial impact the pandemic would have on people.

Here are some of the key changes that may be of interest:

Protected Trust Deed Protocol

A Protected Trust Deed protocol was introduced by the Accountant in Bankruptcy (AiB) on 1 October 2021. Key changes introduced by the protocol:

Wherever practicable, an interim dividend should be paid to creditors after month 12 from the date the trust deed is granted and quarterly thereafter.
Should a trustee decide to withhold the debtor’s discharge from their liabilities included in the PTD, they must first submit a completed “Application to Refuse Debtor Discharge” form to AiB for consideration and to seek agreement.
Trustees must only accept referrals from FCA approved lead generator firms.

It should be noted that there is no legislative or regulatory requirement for trustees to follow this protocol and its provisions are based on consent, however, the AiB hopes that trustees will find the changes helpful and actively agree to implement them.

Moratoriums on diligence

The Scottish Government passed the Coronavirus (Extension and Expiry) (Scotland) Act in 2021 which introduced a couple of changes to Moratoriums on Diligence. Diligence is another word for enforcement in Scotland and those changes were as follows:

If a moratorium is granted, it will last for 6 months – this extended the original period from 6 weeks (42 days). This measure has been extended until 31 March 2022 and Scottish Ministers are expected to extend this further until 30 September 2022.
The restriction of only being allowed one moratorium in a 12 month period was removed. This restriction was subsequently reinforced as of 30 September 2021.

Sequestration minimum debt level

In January 2022, Covid Recovery and Reform (Scotland) Bill was introduced to Scottish Parliament. The key element of the Bill regarding sequestration adjusted the minimum debt level required before a creditor can apply for sequestration from £3,000 to £10,000. This was introduced as temporary measure and will be rolled back on 31 March 2022. However, if the Bill passes, it would introduce a new minimum debt level for sequestration of £5,000 bringing Scotland in line with the minimum debt level for bankruptcy in England & Wales.