Proposed Changes to Bankruptcy Law in Scotland

by Wildfire Marketing Group - Date: 2006-12-09 - Word Count: 546 Share This!

A bill has been proposed in Holyrood, the Scottish Parliament, which would align Scotland’s bankruptcy laws with those of the rest of the UK. The bill is the result of 20 years of research and consultation into debt and bankruptcy by the Scottish Law Commission, according to an executive spokeswoman. If passed, the new law would enable individuals and small businesses to recover from bankruptcy more quickly than now. At the same time, new measures will be added to punish bankrupts who are thought to have been fraudulent or negligent.

The proposed bill would substantially liberalise Scotland’s bankruptcy legislation. The period after bankruptcy for which anyone would have to wait before they can borrow money again, would be reduced from three years to one; the same as the UK. Creditors, instead of going to a Court to apply for bankruptcy, could apply directly to a Scottish Executive agency, incurring lower costs. This, it’s argued, would make it easier for creditors to make someone bankrupt. It’s not all good news for creditors though, as the “Bankruptcy and Diligence...Scotland” bill would add restrictions to their right to sell a debtor’s family home to reclaim their debts.

Individuals, who it was felt were negligent leading up to bankruptcy, could face extra punitive restrictions of up to a maximum of 15 years. Also, so-called “bankruptcy restriction orders” would also be used where necessary, to protect the interests of the public and businesses.

The Deputy Enterprise Minister Allan Wilson said: "People who can't pay their debts can become bankrupt through misfortune such as job loss or misjudging a risk”. Mr Wilson also added that such people can have their confidence undermined, and that the new moves would allow them to restart their lives, or their businesses, when the bankruptcy period was over. However Mr Wilson was keen to point out that bankruptcy should not be seen as a ‘soft option’, and that their must be punitive measures in place for the minority of bankrupts who are negligent.

The new bill intends to revamp the system of diligence – the legal method to enforce payment of orders issued by the civil courts. These would include leaving a minimum amount of money in debtor’s bank accounts, which they could have set aside to support themselves after bankruptcy.

Mr Wilson argued that the bill’s reforms affecting diligence would mean “A better balance in our system of debt enforcement”, “.. improving debtor protections to ensure that those people who owe money are treated with fairness and dignity.”

Murdo Fraser, the Conservatives' enterprise spokesman expressed some concern about the new bankruptcy legislation, saying: "We must be careful that we are not making the option of bankruptcy too easy for those who simply do not wish to pay their debts.” “We will be scrutinising this legislation extremely carefully to ensure that a green light is not given to thousands of Scots to go down the bankruptcy route."

The “Money Advice” charity also criticised proposals to shorten the period of bankruptcy. Concerned that bankruptcy could become too easy a way out for some in the short-term, leaving individuals with long-term problems, their spokeswoman Yvonne Gallacher warned that bankrupts: "…may not be aware of all the risks attached to it and the possible impact on credit in the future."

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