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| This study provides an analysis of available statistics relating to the enforcement of debts by diligence. The work draws on data collected from the sheriff courts and sheriff officers. The project was commissioned by Scottish Courts Administration as part of a programme of work to evaluate the reforms made to the procedures for enforcing debts introduced by the Debtors (Scotland) Act 1987 and provides information on the use made of various new and reformed procedures throughout Scotland between 1989 and 1995. |
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| Main Findings |
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- Since the Debtors (Scotland) Act 1987 was introduced, there has been a decline of some 20% in the number of decrees granted in actions involving a monetary claim. This pattern of court use is not just confined to debt enforcement but seems to be part of a wider pattern of a decline in the number of civil actions initiated in the courts.
- The use made of time to pay directions and orders has declined since their introduction in 1989. Five per cent fewer applications for time to pay directions were made in 1993 (the last year for which data was available) compared to 1989, and 25% fewer applications were granted.
- The use made of time to pay orders was very much lower: in a typical year slightly less than 300 applications were lodged in the whole of Scotland. As with time to pay directions, fewer applications were made and granted at the end of the observed period (1995) than at the start (1989).
- For both time to pay directions and orders a majority of applications are granted and most of these specify repayment by instalments rather than deferred lump sum.
- The new earnings arrestment has proved to be a much used diligence with the numbers of earnings arrestments served by sheriff officers increasing eight-fold over the period 1989 to 1995.
- The number of conjoined arrestment orders made, although increasing six-fold over the study period, has remained low relative to the numbers of earnings arrestments actually served. Approximately one conjoined arrestment order is made for every 100 earnings arrestments served.
- Since the Act was introduced, there has been a decline in the use of poinding and warrant sale procedure: between 1989 and 1995, the number of reports of poinding made nearly halved. However, the number of occasions on which a warrant sale was executed did not follow the same downward trend, with 496 warrant sales executed in 1989 compared to 534 in 1995.
- The number of occasions on which debtors subject to poinding and warrant sale procedure made use of the measures available to protect themselves from undue hardship and personal distress was very low, with applications made in just one or 2% of cases.
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| Introduction |
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| This study outlines an analysis of available statistics on the key procedures introduced or reformed by the Debtors (Scotland) Act 1987 (the Act) and forms part of a programme of research designed to evaluate the Act. This legislation introduced a series of reforms designed to address the deficiencies of the existing debt enforcement system. The evaluation was commissioned by Scottish Courts Administration and conducted by the Legal Studies Research Branch of The Scottish Office Central Research Unit. |
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The principal components of the reforms were as follows: - 2 new court orders - time to pay directions and orders - designed to allow debtors an opportunity to pay off their debts either by instalments or by deferred lump sum, free from the threat of diligence.
- a new continuous diligence against earnings, the earnings arrestment, intended to be efficient for creditors while also providing adequate protections for debtors through a revised scale of deductions. In addition to this, a new conjoined arrestment order allowed more than one creditor to benefit from a single earnings arrestment was introduced.
- reforms to provide greater protection to individual debtors subject to poinding and warrant sales procedure. These reforms were designed to protect individual debtors from 'undue economic hardship and personal distress'. Broadly, these took the form of: a series of rights for the debtor to intervene in the poinding and warrant sale process; changes to arrangements governing the enforcement of debts by this diligence, including a revised list of goods exempt from poinding; and discretionary powers given to sheriffs to intervene in the process.
- a series of measures to assist the unrepresented debtor make use of the protections provided under the Act, including, for example, 'user friendly forms' and a 'no expenses rule', whereby, in relation to court applications, neither party is liable for the expenses of the other, regardless of the outcome of the application.
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| Debt enforcement in the sheriff courts |
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| Enforcing a debt by diligence and accessing the provisions contained in the Act is usually done by raising a court action and obtaining decree for payment. Available information from Civil Judicial Statistics shows that between 1989 (the first full year of the operation of the Act) and 1995, the number of monetary court decrees granted by the sheriff courts in Scotland initially rose before declining in 1995 to a point some 20% below the 1989 figure 4. This pattern seems to be part of a broader trend as it is mirrored by a decline over the same period in the number of all civil actions both initiated and disposed of, as shown in Chart 1. |
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This downward trend in the use of the courts to obtain decree to enforce debts thus provides the context for this analysis of available statistics on the use made of debt enforcement by diligence. The report draws on data from Civil Judicial Statistics and from information collected by sheriff officers as part of their obligations under section 84 of the Act. The analysis presented covers the following issues: - the use made of time to pay directions and orders;
- earnings arrestment and conjoined arrestment orders; and
- the use made of poinding and warrant sale procedure.
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| Analysis of these issues provides important contextual information for the findings of the other studies which make up this evaluation (see page 6). |
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| Time to pay directions and orders |
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| Prior to the awarding of a decree, a debtor can admit a debt and apply for a time to pay direction. The debtor can apply to pay the debt either by instalments over a period of time or in a single lump sum by a set date in the future. Time to pay orders can only be applied for after the onset of diligence, usually after a charge has been served or after an arrestment of funds has been served. A number of restrictions apply to both time to pay directions and time to pay orders _ they are only competent for debts below £10,000 (excluding interest and expenses); for debts for which the debtor is liable in a personal capacity; and for debts other than those relating to maintenance payments, taxes recoverable under summary warrant procedure, or fines. |
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| Time to pay directions |
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| Chart 2 shows the number of applications made and granted for time to pay directions between 1989 and 1993 (the last year for which data are available). |
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| The Chart shows that, despite a noticeable increase in the numbers of applications being made and granted in the first 2 years of operation of the Act, 5% fewer applications were made in 1993 than in 1989 and 25% fewer time to pay directions were granted. |
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| As stated earlier, debtors can seek to pay their debt by instalments or deferred lump sum. The deferred lump sum was a new innovation as no provision for such repayment had been available under the previous summary cause instalment decree arrangements. The vast majority of time to pay directions granted are for instalment decrees rather than for a deferred lump sum. Figures show that in each of the 5 years examined, the proportion of time to pay directions granted involving deferred lump sums declined from 22% in 1989 to 7% in 1993. |
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| Time to pay orders |
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| Information available on the number of time to pay orders sought and granted indicates that the use made of this measure is much lower than for time to pay directions. |
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| Chart 3 shows that for each of the 5 years examined, the number of applications for time to pay orders was under 300. The majority of applications for time to pay orders are granted and most are for instalment rather than lump sum arrangements. However, as with time to pay directions, less use was made of this provision in 1993 compared to 1989. |
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| Diligences against earnings |
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| Earnings arrestments |
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| Information is available from sheriff officers on the numbers of earnings arrestments served for the period 1989 to 1995 (see Chart 4). The figures relate to arrestments carried out in respect of debts enforced under summary warrant procedure (eg the enforcement of central and local government taxes such as the community charge) as well as ordinary procedure. |
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| Chart 4 shows a marked rise in the number of earnings arrestments served. Part of the increase is likely to be due to the use of the diligence to enforce the significant numbers of community charge debts which occurred principally over the period 1989 to 1993. However, even allowing for the 'community charge effect', the recorded increase in use of earnings arrestments would seem to indicate that the new diligence is popular with creditors. |
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| Conjoined arrestment orders |
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| Conjoined arrestment orders were introduced to allow more than one creditor to share in the proceeds of an earnings arrestment. Although the problem of competing arrestments was considered not to be a serious problem under the previous system, such a procedure was deemed necessary because of the continuous nature of the new earnings arrestment. |
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| Chart 5 provides information on the number of applications for conjoined arrestment orders made and the number of such orders granted. The table shows that the number of applications made for such orders has risen steadily over the 5 year period studied from 195 in 1989 to 795 in 1993 and that a vast majority of conjoined arrestment orders are granted by the courts. Despite the overall increase in the number of conjoined arrestment orders made, the numbers remain small relative to the number of earnings arrestments, with about one conjoined arrestment order granted for every 100 earnings arrestments served. |
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| Poinding and warrant sale procedure |
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| The Act brought forward reforms to the procedures for enforcing debts by poinding and warrant sale with the aim of improving the protections afforded to debtors while maintaining the efficiency of the diligence as a means of debt enforcement. |
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| Use of poindings and warrant sales |
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| Statistics suggest there has been a change in the way creditors use this diligence following the introduction of reforms by the Act. One key trend, shown in Chart 6, is that the diligence is initiated less frequently. The number of reports of poinding lodged with the court almost halved in the 7 years following the introduction of the Act. Also of note is that, while the diligence is initiated less frequently, the later stages of the diligence did not follow the same downward trend. Applications for warrants of sale remained relatively stable, before dropping away in 1994 and, while the number of warrant sales has remained relatively stable with some fluctuation from year to year, the number executed in 1995 (534) was actually greater than in 1989 (496). Further, the ratio of poindings to warrant sales was approximately 20:1 in 1989 but in 1995 the ratio was close to 10:1. |
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| The use of debtor protections |
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| Recorded statistics also show that debtors made limited use of their new rights to intervene in the diligence process by making applications for release of poinded goods or recall of poindings. Nevertheless, the use of the provisions has increased, as shown in Chart 7. Indeed, the total number of such applications made each year nearly doubled over a 5 year period, from a total of 80 applications in 1989 peaking at 186 in 1992 before declining to 152 in 1993 (the last year for which information was available). This was made up of slightly more applications for release of poinded items than recall of poinding. The number of applications granted over this same period rose in line with the trend in applications, and with the exception of 1992, the proportion of applications granted by the court has remained relatively steady at about 40% in any one year. |
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| Overview |
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| The published data on the use of diligence procedures reveals some interesting trends in the use of the various measures introduced by the Debtors (Scotland) Act 1987. While initially increasing between 1989 and 1991, the number of payment decrees granted between 1989 and 1995 went on to decline to the point in 1995 where 20% fewer decrees were recorded than in 1989. This trend appears to be part of a wider pattern of decline in the use of the courts rather than being related to the reforms of the Act. |
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| A key reform of the Act was the introduction of new orders to assist debtors to repay their debts: time to pay directions and time to pay orders. The data presented show a decline in the take-up of both these measures. The decline in the use of the courts to pursue debts as demonstrated by the decline in the number of monetary decrees granted could have contributed to this pattern. More significantly, however, Whyte's (1999) Study of Debtors found low awareness of these new orders and the views of debt advisers, reported in Fleming's (1999) Study of Facilitators, suggest that time to pay directions and orders may not always be an effective option for debtors who wish to repay their debts but cannot afford to do so outright. |
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| Earnings arrestments have shown the most significant rise in use, with the numbers served increasing some eight-fold between 1989 and 1995. The use of conjoined arrestment orders, whereby creditors seek to join into an existing earnings arrestment, also increased following their introduction, although use is still infrequent. Such trends do suggest that these measures (particularly earnings arrestments), which were designed principally to assist creditors, have been successful. This is confirmed by the views of many of those involved in debt enforcement as reported in other studies which make up this evaluation. |
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| Information on the use of poinding and warrant sale procedure suggests that the Act has resulted in a more selective use of this diligence, with creditors initiating fewer poindings while the number of warrant sales actually executed has remained relatively stable. Figures show, however, that debtors have made little use of their new rights to intervene in the diligence. |
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| The trends in the use of poinding and warrant sale procedures suggest that the reforms of the Act may have been effective in redressing any previous imbalance against debtors by reducing some of the unnecessary use of the diligence. However, the low use made of new rights for debtors suggests that any change in the use of this diligence has not resulted from the direct activities of debtors. |
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| This analysis has illustrated changes in the use of a number of the measures introduced or reformed by the Debtors (Scotland) Act 1987. The trends identified are further explored in other parts of the programme of research where the views and experiences of those involved in debt enforcement are investigated. |
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| 1 Report on Diligence and Debtor Protection (1985), Edinburgh: The Scottish Law Commission, No. 95. |
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| 2 The Act also introduced reforms to the rules governing the conduct and activities of officers of court and the procedures for the recovery of summary warrant debts. These are not included within the remit of the research. |
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| 3 The Act also introduced a third new diligence against earnings, the current maintenance arrestment. This procedure allowed for the arrestment of a maintenance debtor's earnings in order to prevent future arrears in cases where problems had previously occurred. This measure was not included in the evaluation. |
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| 4 Information is not available from Civil Judicial Statistics on the number of such actions initiated. |
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| About the study |
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| The Debtors (Scotland) Act 1987 aimed to strike an equitable balance between the interests of creditors and debtors by providing effective machinery for the recovery of debts, while at the same time ensuring that debtors were protected from undue economic hardship and personal distress. The Act dealt with 3 main areas: firstly, it introduced 2 new procedures - time to pay directions and time to pay orders - to give debtors time to pay their debts free from the threat of diligence; secondly, it introduced reforms to the procedures for poindings and warrant sales; and thirdly, it introduced 3 new diligences against earnings - the earnings arrestment, the conjoined arrestment order and the current maintenance arrestment - replacing the previous system of arrestment of earnings and action of furthcoming. |
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Scottish Courts Administration commissioned a programme of research to evaluate how the Act was working in practice and the extent to which it was meeting its main objectives. The research consisted of 7 separate studies. Four qualitative studies sought information on the views and experiences of commercial creditors, individual creditors, debtors and facilitators (solicitors, advisers, sheriffs, sheriff officers) and 3 quantitative studies examined the characteristics of payment actions, the characteristics of poindings and warrant sales, and trends in the use of the measures introduced by the Act. Findings from each of the studies, as well as an Overview, have been published by The Scottish Office Central Research Unit (SOCRU) as follows: - Headrick, D. and Platts, A. (1999) Evaluation of the Debtors (Scotland) Act: Study of Individual Creditors. (Report and Research Findings No.10)
- Platts, A. (1999) Evaluation of the Debtors (Scotland) Act: Study of Commercial Creditors. (Report and Research Findings No.11)
- Whyte, D. (1999) Evaluation of the Debtors (Scotland) Act: Study of Debtors. (Report and Research Findings No.12)
- Fleming, A. (1999) Evaluation of the Debtors (Scotland) Act: Study of Facilitators. (Report and Research Findings No.13)
- Fleming, A. (1999) Evaluation of the Debtors (Scotland) Act: Survey of Poindings and Warrant Sales. (Report and Research Findings No.14)
- Fleming, A. and Platts, A. (1999) Evaluation of the Debtors (Scotland) Act: Survey of Payment Actions in the Sheriff Courts. (Report and Research Findings No.15)
- Fleming, A. and Platts, A. (1999) Evaluation of the Debtors (Scotland) Act: Analysis of Diligence Statistics. (Report and Research Findings No.16)
- Platts, A. (1999) Evaluation of the Debtors (Scotland) Act: Overview. (Report only)
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| 'Evaluation of the Debtors (Scotland) Act 1987: Analysis of Diligence Statistics', the research report summarised in this Research Findings, is available priced £5. Cheques should be made payable to the Stationery Office and addressed to: |
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| This report can also be ordered online from: www.thestationeryoffice.co.uk |
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| Further copies of this Research Findings may be obtained from: |
The Scottish Office Home Department,
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EDINBURGH EH11 3XA |
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| This document and other Research Findings and Reports may be viewed on the internet at http://www.scotland.gov.uk/cru/ |