This item was published during the term of a previous administration that ended in April 2007
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Bankruptcy and Diligence
30/11/2006
The Bankruptcy and Diligence etc. (Scotland) Bill which is intended to modernise legislation and achieve a better balance between the rights of debtors and creditors was apporoved by MSPs in the Parliament tonight.
Deputy Minister for Enterprise and Lifelong Learning Allan Wilson said:
"This Bill is good news for Scotland we have succeeded in modernising bankruptcy and diligence laws for the 21st century. Moving forward, these changes will help ensure a fairer, more effective framework for both debtors and creditors.
"The Bill will do more to help people who experience debt problems and help people who are overcome by debt to start again. But it also offers better protection for the public against those who try to abuse the system.
"The Bill comes at the right time. The number of people with debt problems is going up across the UK. This is bad for individuals and bad for business. We are confident that we can make things better through the improvements made by this Bill.
"It will modernise floating charges, helping businesses to borrow wisely. This new legal framework responds to the needs of our society and helps create the conditions needed to support sustainable, long-term economic growth.
"In short this Bill will replace a range of old and unfair diligences with updated ones being tough for the won't pays, but offering much better protections for the could pays and the can't pays."
Part of the Bill is the creation of a Scottish Civil Enforcement Commission which will give Scotland a modern properly regulated enforcement system. The new Commission will be open and accountable and will help people understand their rights and responsibilities at a difficult time.
Some of areas the new Bill will address are:
Some people find it too hard to get debt relief through bankruptcy
Individuals can't prove that they are insolvent if creditors don't try to enforce the debt, and creditors don't try if there's no money to be had. So a new path into bankruptcy for low income low asset debtors came into the Bill at stage 2
Some people who could pay their debts are being forced into bankruptcy
A power for the court to delay sequestration where a payment programme may be agreed came into the Bill at stage 2
People were worried about the possible impact of land attachment
Selling land is a serious course of action, although not as serious as bankruptcy. The Bill applies over 20 debtor protections for that reason. Land will only be attached for a debt of over 3000 and there is a minimum six month gap between attachment and sale to allow individuals to sort out debt problems.
It is expected that sales of land will be rare, and sales of homes very rare. This is because there will be no strong incentive for the creditor to sell the land as the security is worth having by itself, and secondly the Bill includes stronger debtor protections than for example under the Mortgage Rights (Scotland) Act 2001.
The Executive will monitor this new system and there will be a review after two years.