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.
More than a third of workers in Scotland are fearful that they might lose their jobs at some point over the next 12 months.
Large numbers of households across Scotland could be facing serious financial problems once the option to defer their bills or their debt repayments ceases to be available.
Our Scottish based team can help advise you on your debt problems.