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Changes to Bankruptcy Legislation – Bankruptcy and Debt Advice (Scotland) Bill - 8th April 2014 - Click for larger version Changes to Bankruptcy Legislation – Bankruptcy and Debt Advice (Scotland) Bill - 8th April 2014

The Bankruptcy and Debt Advice (Scotland) Bill was passed by the Scottish Parliament on 20 March 2014. With an underlying objective of balancing the interests of creditors in being paid against the interests of debtors in access to a fair and just bankruptcy process, the Bill will make a number of significant changes.

The prospects of recovery for a creditor could be assisted by the following amendments to existing provisions:-

1. Property acquired by the debtor up to 4 years after the date of bankruptcy will now form part of the bankrupt estate and will be subject to creditor claims. As matters stand, unless an extension is granted, the cut-off point is one year – after which property acquired falls outwith the process.

2. If after the bankruptcy process comes to a conclusion assets are discovered that would have formed part of the process, there will now be a specific procedure to allow the process to be re-opened with a view to paying creditors from those assets. There is no clear process dealing with this scenario under existing legislation.

3. Discharge of a debtor whose whereabouts are unknown and cannot be traced can now be delayed indefinitely. This could be a useful tool to bring to the surface debtors who have “gone awol”. As matters stand, a debtor’s discharge can only be deferred for up to 2 years. A debtor will no longer be able to put their head in the sand, avoid being located and escape the consequences of sequestration after such a short period.

A number of innovations have also been included from a point of view of further debtor protection. The Bill endeavours to promote financial advice and education. A debtor considering applying for his/her own bankruptcy will require to take advice from a money adviser and in certain circumstances – for example, if a debtor has been bankrupt a number of times – financial education will be compulsory. A debtor who gives notice to the Accountant in Bankruptcy of intention to enter into an insolvency process will also be protected by a moratorium on diligence for a specified period.

Should you require any advice in connection with bankruptcy/insolvency, either as a creditor or debtor, then please contact Alan McKee (alan@macdonaldhenderson.co.uk) or Michael Hankinson (michael@macdonaldhenderson.co.uk) by email or telephone, on 0141 248 4957.

Last updated: 4.06pm, Tuesday 8th April 2014

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