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| This study examined the views and experiences of private individual creditors of the procedures introduced by the Debtors (Scotland) Act 1987. The study was based on both a postal survey and in-depth interviews, with samples drawn from court records in 5 sheriff courts. The study is part of an evaluation of the reforms of the Act. |
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| Main Findings |
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- For the majority of individual creditors in the study, the awarding of a decree was regarded as a hollow victory as they did not receive the money owed following their successful court action.
- A significant minority of creditors who did not receive full payment following decree chose not to take action to enforce the court order.
- A high proportion of creditors 'dropped out' at the various stages of the debt enforcement process, opting to take no further action despite continued non-payment of the debt.
- The majority of interviewees were dissatisfied with their experiences of the debt enforcement system. Factors contributing to this dissatisfaction included high expectations, the cost and time involved in taking action and the poor outcomes achieved. In contrast, most were satisfied with their experience of litigation.
- The majority of interviewees had used solicitors for advice regarding litigation and enforcement. There was a tendency to pass decision making to the 'professionals', with a consequent low level of knowledge about the debt enforcement system.
- Non-legally represented creditors expressed dissatisfaction at information available on enforcement and wanted more information on post-decree procedures to be made available at an early stage in the litigation process.
- Creditors displayed low levels of knowledge about options for diligence and their likely effectiveness.
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| Introduction |
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| This study forms part of a programme of work designed to evaluate the Debtors (Scotland) Act 1987 (the Act). This Act, implemented in 1988, introduced major changes to the procedures for enforcing debts in Scotland. The Act dealt with 3 main areas: new measures allowing debtors unable to pay their debts outright to do so over time (time to pay directions and orders); new diligences against earnings (earnings arrestments, conjoined arrestment orders and current maintenance arrestments); and reforms to poinding and warrant sale procedure intended to protect debtors from the harsher aspects of the diligence. The Act also contained a package of measures designed to assist unrepresented parties make use of the provisions of the Act. These included '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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- Although the great majority of payment actions are raised by businesses, the views and experiences of individual creditors are also important. Thus, this study sought to gather information on:
- the experience of private individuals using the machinery of the Act;
- the nature and sources of advice used, and views on that advice;
- views on literature relating to the Act;
- the acceptability and success of time to pay arrangements, earnings arrestments, and poindings and warrant sales;
- views on general debt enforcement and individual diligences;
- reasons, where appropriate, for not using the available legislation and for the success of any informal arrangements where these were used instead.
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| The findings of the study were based on the responses of 132 individuals who took part in a postal survey or participated in in-depth interviews. All the individuals, identified from court records at 5 sheriff courts, had been awarded a decree and the study sought to find out what had happened regarding payment of the money owed following their successful court action. |
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| The postal questionnaire identified what had happened to creditors following the award of decree, providing basic information about how cases progress through the enforcement system, while the interviews were used to explore the experiences of creditors involved in the debt enforcement process in more depth. |
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| Receiving money following the awarding of a decree |
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| The research found that the awarding of a decree was something of a hollow victory. Following court action, two-thirds of creditors (69%) receiving an open decree reported receiving either no payment or only part payment. Of those creditors awarded a decree with a time to pay direction attached, only a small proportion (20%) had received no payments. However, nearly half indicated that the debtor had defaulted following some payments. Thus, the majority of creditors (68% in total) had been faced with the choice of whether to enforce their decree (see Chart 1). |
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| The study found, however, that of those creditors faced with the choice of enforcement, a significant minority (one quarter) had taken no action to recover the money due under the decree. In addition, others (14%) had restricted their attempts at recovery to informal methods (eg letters and telephone calls). In total, nearly two-fifths had not instructed diligence to enforce their decree. The study in fact found that creditors 'dropped out' at each stage of the debt enforcement system, taking no further action, despite continued non-payment of the debt (see Chart 2). |
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| Of those creditors who had pursued their debts through formal enforcement, only a minority (17%) reported that they had received full payment as a result of the charge (usually the first step in the diligence process). In the majority of cases further action was necessary. However, a significant proportion of these creditors (29%) reported that, following their lack of success on serving a charge, they took no further action. Two-thirds of those who pursued their debts further than serving a charge by instructing diligence found that this further action was fruitless and the debt was not repaid. Only a minority were successful in realising the money owed, or in prompting a payment arrangement. |
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| The research also found that the majority of individual creditors were unhappy with their experience of the debt enforcement system, regardless of whether or not the interviewee had eventually succeeded in securing repayment of the debt. However, much of the dissatisfaction appeared to be attributable to disappointing outcomes in relation to the initial expectations of the interviewees. The study found that a quarter of interviewees (26%) had believed that the award of a decree in their favour meant that repayment of the debt was guaranteed, and that the courts would have a higher level of involvement in securing repayment. Creditors also expressed dissatisfaction at the length of time actions took, and the costs of enforcement. |
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| Sources of advice |
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| While a wide variety of sources of advice was used, the majority of individual creditors had used the services of a solicitor at both the litigation and enforcement stage of debt recovery. Indeed, the interviews revealed a high incidence of decision making being passed from creditors to the 'professionals' (lawyers and sheriff officers), and a consequent low level of understanding as to what had happened during their actions. |
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| Other sources of advice used included court staff, advice workers and information booklets. Creditors who reported drawing on the services of court staff generally found them a useful source of advice, particularly at the litigation stage. Interestingly, creditors who acted without legal representation appeared to be more successful than those acting with legal representation in recovering their money. Nearly two-thirds of creditors acting through a solicitor at the enforcement stage reported receiving nothing, in contrast to just one quarter of those acting without legal representation. Although this does not take account of the nature or complexity of the cases involved, it does indicate that individuals can be successful in pursuing debts without legal representation. |
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| Informal arrangements |
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| The study found that, of those attempting to enforce decrees, the majority moved straight to formal enforcement rather than attempting any informal methods of recovery. Only 14% of creditors who did not receive payment following decree had made informal attempts at recovery, and these creditors tended to be those advised by solicitors. |
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| Information available |
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| The research found a low level of knowledge amongst individual creditors about procedures for debt enforcement. Whilst those who had been advised by solicitors did not seem concerned about this lack of knowledge, creditors who had acted without legal representation were dissatisfied with the amount of information available to them at the enforcement stage. This was in contrast to the litigation stage, where procedures were on the whole found to be simple and the information supplied by the courts was considered to be useful and of high quality. Creditors enforcing debts personally wanted advice and information on enforcement to be made available at an early stage to allow them to make realistic assessments of the cost effectiveness of raising court action in the light of knowledge about the post decree stages. |
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| The provisions of the 1987 Act |
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| Although the research discovered general dissatisfaction with the debt enforcement system, this was not aimed at particular aspects of the procedures reformed by the 1987 Act. Many of the interviewees had passed effective decision making on to the professionals of the system. They often displayed little knowledge of options open to them, and reported having simply sanctioned recommendations from their advisers. Because of this, interviewees' views on time to pay arrangements and diligences tended to be limited and to reflect whether the procedure had resulted in repayment or not. Nevertheless, the research found the following: |
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| Time to pay arrangements |
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| Of the cases included in the study, the majority of time to pay directions had not been adhered to. Some creditors had accepted such arrangements reluctantly, as the best chance of receiving the money owed, while others had been unaware that their decree had had a time to pay direction attached, or were unclear about the debtor's payment record. When arrangements had broken down, informal enforcement was more common than diligence. |
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| Only 2 time to pay orders were identified in the research: one had operated successfully while the other had broken down on several occasions. |
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| Poindings and warrant sales |
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| Although poindings had been used in a number of cases, actual warrant sales were rare. There was in fact a degree of reluctance to instruct this diligence, particularly the final stage, and some who had been unaware that this course of action had been taken to enforce their decree were unhappy that the diligence had been used. |
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| Earnings arrestments |
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| Although this diligence had been used successfully by a number of creditors, the research identified several cases where arrestments had failed because the debtor had ceased to be employed. |
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| Action following unsuccessful diligence |
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| The majority of creditors took no further action when an initial diligence failed to recover their money. This was often on advice from a solicitor that the debtor had insufficient assets to warrant further action. Creditors generally accepted that further action would have been 'throwing good money after bad'. |
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| Concluding remarks |
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| This study highlighted the problems that individuals have in recovering money following a successful court action. It identified low levels of initial payment and significant levels of 'drop out' at each stage of the enforcement system, with creditors choosing to take no action despite non-payment. |
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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: Study of Individual Creditors', the research report summarised in this Research Findings, is available priced £5. Cheques should be made payable to the Stationery Office and addressed to:
The Stationery Office Bookshop,
71 Lothian Road,
Edinburgh,
EH3 9AZ.
Telephone: 0131-228 4181 or Fax: 0131-622 7017 |
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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
Central Research Unit
Room J1-0
Saughton House
Broomhouse Drive
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/ |