New Insolvency Rules Introduced Across Scotland
April 9, 2015
A series of new laws affecting the processes involved in insolvency and debt recovery have come into effect across Scotland this month with both debtors and creditors set to be impacted.
The changes are being introduced via the Bankruptcy and Debt Advice (Scotland) Act 2014, better known now as the BADAS legislation, with the aim being to create a fair balance for both sides of the equation in an insolvency scenario.
As a result of the new legislation, debtors in Scotland will be obliged to seek financial advice from experts in the field before they can apply for their own bankruptcy. Plus, there will be a six-week moratorium or window during which debtors are protected from legal action as they seek advice on how best to deal with debts that they can’t afford to pay off.
Insolvent debtors will also now be able have their contributions to paying off debts deducted directly from their wages if they’re in employment or from another form of income where possible.
The new rules also open up the prospect though of debtors having any assets they acquire after entering bankruptcy considered in proceeding for a period of four years after they first become insolvent. Prior to the introduction of the BADAS rules, the period in which new assets would be considered part of a bankruptcy scenario was only three years in Scotland.
The newly-introduced legislation also makes clear that the debtor contributions being made in the context of any bankruptcy, Trust Deed or Debt Arrangement Scheme should be assessed on the same basis at all times.
“The changes implemented under BADAS will have an impact on both debtors and creditors,” said David Menzies, director of insolvency at the Institute of Chartered Accounts Scotland (ICAS).
“Creditors need to be aware that they will now only have 120 days to lodge a claim in bankruptcies otherwise they will lose their entitlement to any dividend,” he explained.
On the issue of when debtors can be discharged from bankruptcy, Menzies said: “Although it is expected that the majority of debtors will still receive their discharge after one year, this will no longer be an automatic entitlement but will be at the discretion of the Accountant in Bankruptcy and subject to satisfactory co-operation with their trustee.”
The new laws came into effect across Scotland on April 1st 2015.
If you’re worried that the council might take action against you for non-payment of council tax, entering into a Scottish trust deed can be a beneficial step. It stops legal action by all creditors included in the arrangement, and provides a ‘safe haven’ from which to regain control of your finances. As council tax arrears […]
A debt payment programme (DPP) remains on your credit file for six years, along with other default markers and court judgments that have been made against you. This can seriously affect your ability to borrow for this period of time, and longer. Even if you can secure borrowing, lenders are only likely to offer unfavourable […]
If you owe a debt of £5,000 or less, your creditor may send you a Simple Procedure Notice of Claim. This is a relatively new procedure that was brought in by the Scottish government and commenced on 28th November 2016 – their intention being to make it easier to resolve debt disputes. So if you’ve […]
A Bankruptcy Restriction Order may be made against you if it’s believed that you acted dishonestly, recklessly or unlawfully before you were made bankrupt, or during your bankruptcy. Your Trustee will inform the Accountant in Bankruptcy (AiB), and if their suspicions are upheld, a BRO of 2-15 years can be made depending on the seriousness […]
Debt payment programmes (DPPs) are an intrinsic part of the Debt Arrangement Scheme, which allows you to pay off unsecured debt at an affordable rate. If a debt payment programme is rejected by one or more creditors, the DAS Administrator can apply their discretion on whether to approve the plan, after using a test to […]
If you’re struggling to pay your unsecured debts, a debt payment programme could help you to regain control of the situation, and become financially stable again. Debt payment programmes are a fundamental part of the Debt Arrangement Scheme (DAS) in Scotland, and allow you to repay over a longer period of time. These programmes involve […]