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PART TWO - QUESTIONS FOR CONSULTATION
1. Income
The new section 5A of the Bankruptcy (Scotland) Act 1985 provides the condition that the debtor's weekly income on the date of application does not exceed £100. We intend that the application process should be as simple as possible. For example, we could adopt rules similar to those are used for applications for Housing Benefit, i.e. if the applicant is in receipt of an income based Social Security benefit they are treated as having no income. The following questions ask if this level of income is appropriate and how income should be calculated.
1a Do you agree with the proposal to treat someone in receipt of an income based Social Security benefit as having no income for the LILA scheme?
1b Do you think £100 (gross) is the appropriate level for the purposes of calculating low income?
1c If not, please state what you would consider to be the appropriate level e.g. £150, £200, and why?
1d How should the level determined be calculated, e.g. gross income at date of application or gross weekly income averaged over 6 month or 12 month period?
1e Should Child Tax Credit be disregarded in the calculation of income?
1f Should any other benefits or tax credits be disregarded in the calculation of income?
1g If so which benefits or tax credits should be disregarded?
2. Assets
The new section 5A of the Bankruptcy (Scotland) Act 1985 provides the condition that the total value of a debtor's assets on the date of application of a LILA application does not exceed £1,000. The existing process of bankruptcy exempts certain assets, such as tools the debtor needs to work, and household items, being realised. A full list of exempted items is shown at Annex D. Assets that are valued at under £1,000 are not normally realised and it is not anticipated that the LILA procedure will be different. Therefore the following questions ask if this level is appropriate and how will assets be defined.
2a Do you think £1,000 is the appropriate level for the purposes of calculating assets?
2b If not, please state what you would consider to be the appropriate level, and why (for example, linking to other limits in use in diligence).
2c Should excluded assets only be those which would be excluded from bankruptcy?
2d If not, which other types of assets should be included or excluded?
2e Do you agree that anyone who owns their own house or other property should be excluded from the LILA scheme?
2f If not, why?
3. Debt Threshold
Section 25 of the Bankruptcy and Diligence etc (Scotland) Act 2007 amends section 5 of the Bankruptcy (Scotland) Act 1985 and allows for the amendment of the debt threshold for petitions for bankruptcy to increase from £1,500 to £3,000. It is the intention that this threshold (£3,000) will be used for LILA applications to maintain consistency. The following question asks if this level is appropriate for LILA.
3a Should there be a different debt threshold for LILA applications?
3b If so, at what level should it be set and why?
4. Applications
Section 14 of the Bankruptcy and Diligence etc (Scotland) Act 2007 amends the provisions of the Bankruptcy (Scotland) Act 1985 that deal with debtors' petitions. This will allow for applications to be determined by the Accountant in Bankruptcy. Applications are expected to be received on-line and this will include those made under the LILA proposals. At present a fee of £63 is charged for lodging a petition for bankruptcy with the Court. It is anticipated that the fee payable for lodging an application with the Accountant in Bankruptcy will be approximately £50 to cover outlays. Under present bankruptcy legislation the debtor must prove Apparent Insolvency before an award of bankruptcy is given. Under LILA proposals proof of apparent insolvency will not be necessary. We propose that it will be sufficient for a debtor to complete a simple Statutory Declaration as evidence that they meet the LILA criteria. The following questions deal with the application process.
4a Do you agree that a simple on-line process should be the usual means of applying for bankruptcy through the LILA scheme?
4b If not, what forms of applications should be allowed and why?
4c Do you think that the proposed £50 fee is reasonable?
4d If not, what kind of fee structure would be appropriate? (please consider issues such as deterrence, consistency with other applications, waivers for specific groups of debtors, higher costs of administering hard copy applications)
4e Do you agree that a Statutory Declaration by a debtor should be sufficient for a debtor's application?
4f If not, what else should be required and why?
4g Do you have any other suggestions for the LILA process which you would like us to consider?
5. Awards
We propose that, when a debtor applies for their own bankruptcy under the LILA scheme, there should be a short delay before an award comes into effect. We propose that a delay of 5 weeks would be reasonable. This might be used to allow a debtor to withdraw the application or to allow a creditor to object to the application. On an award of bankruptcy under the LILA Scheme the Accountant in Bankruptcy will be deemed to be appointed as Trustee. Bankruptcy under this scheme will be administered using standard processes, except that creditors would not be invited to submit claims. Current Status Reports will be issued to debtors and any change in circumstances would, where appropriate, require a contribution to the estate. The following questions deal with potential procedures between the application and award of bankruptcy.
5a Do you agree that there should there be a delay between the date of application and an award of bankruptcy?
5b If no, why not?
5c If yes, is 5 weeks a reasonable period of delay?
5d If you do not agree that 5 weeks is a reasonable period, what alternative would you suggest and why?
5e Should the debtor be able to withdraw their application during this period?
5f Should the creditor be entitled to object to an application during this period?
5g If so, should grounds for objection be restricted to the accuracy/honesty of the debtor's averment of low income and low assets?
5h If not, what other grounds for objection should be considered?
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