New Bankruptcy Law Helps Debtors & Home Owners
2nd November 2010
The Office of the Accountant in Bankruptcy has announced certain changes to the law of bankruptcy, which shall take effect on 15 November 2010 in line with the Home Owner and Debtor Protection (Scotland) Act 2010 (in respect of which which Renfrewshire Law Centre took part in the parliamentary consultation). The changes are as follows:—
- New Debtor Application Pack
- New route into Bankruptcy by Certificate for Sequestration
- Exclusion of family home in Protected Trust Deeds
- Extended shrieval powers in respect of family home in bankruptcy
- Abolition of certain requirements to advertise in Edinburgh Gazette
Certificate for Sequestration
The new Certificate for Sequestration creates a new route to bankruptcy to help certain debtors who could not otherwise access bankruptcy, i.e. those unable to prove apparent insolvency or to meet the Low Income Low Asset (LILA) criteria (for example, because a creditor has not yet started legal action). Accordingly, the Certificate for Sequestration may be an appropriate route into bankruptcy for debtors who cannot afford a trust deed yet remain above the LILA criteria.
The Certificate may be granted by an authorised person:—
- Insolvency Practitioners qualified under the Insolvency Act 1985 or their authorised employees / assistants.
- Money Advisers with Type II accreditation under the National Standards for Information and Advice Providers
- DAS Approved Money Advisers
- CAB Money Advisers
- Local Authority Money Advisers
Only a debtor may apply for a Certificate, i.e. not a creditor. The debtor must owe £1,500, reside in Scotland (or have done so during the last year), and must not have been bankrupt in the last five years. There is a £100 fee. The debtor has 30 days to apply for their Bankruptcy.
The debtor should submit evidence of identity and to compliance with bankruptcy criteria, e.g. payslips, bank statements, proof of benefits, tenancy agreement, and HP agreements.
Trust Deeds
The Act makes provision for the debtor’s family home to be excluded from Protected Trust Deeds on condition that the secured creditor agrees not to make a claim for any of the debt and gives this agreement before the trust deed is granted. However, on expiry of the Trust Deed the secured debt will remain active.
Where there no security exists, exclusion of the home will not be possible.
Sheriffs’ Powers over the Family Home
In Bankruptcy, on application of a trustee to sell a family home, the sheriff may refuse to grant this application or postpone it for up to 3 years (previously 12 months).
Similarly, in a Protected Trust Deed, where the home has vested in the trustee, the Sheriff may refuse to grant the application or postpone it for up to 3 years.
Edinburgh Gazette
From 15 November 2010, the trustee need no longer advertise a Bankrputcy Notice in the Edinburgh Gazette.