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Bankruptcy and Diligence etc. (Scotland) Act 2007

Miscellaneous and general
Section 25 - Debt limits in sequestrations

88.This section amends the qualifying debt limit threshold, which sets out the minimum amount of debt that must be owed in order for a person to be sequestrated (see paragraph 59 above). It provides that a debtor must have debts of £3,000 or more. The amount of the qualifying debt limit can be amended by regulations (subject to affirmative resolution procedure).

Section 26 – Creditor to provide debt advice and information package

89.This section amends section 5 of the 1985 Act to introduce a requirement for creditors to have provided debtors with a copy of a debt advice and information package before the creditor can petition for sequestration. The debt advice and information package is the same package required, in the case of attachment of moveables, by section 10 of the 2002 Act.

Section 27 – Continuation of sequestration proceedings

90.Section 27 makes amendments to section 12 of the 1985 Act.

91.Under new subsection (3B) of that section, the sheriff can continue a creditor petition for sequestration for any period up to a maximum of 42 days if the debtor is able to demonstrate to the court that they will be able to pay or satisfy the petitioning creditor’s debt, and any other debts due to creditors concurring in the petition, within that time.

92.Section 27 also inserts a new subsection (3B) into that section which gives a sheriff the option of continuing a creditor petition for sequestration if the sheriff is satisfied that a debt payment programme (DPP) is pending under the debt arrangement scheme (set up under the 2002 Act).

93.If a debtor attends court to show cause why sequestration should not be awarded, and can provide sufficient evidence that a DPP application is ongoing or is about to be made, the sheriff has the power under subsection (3C) to delay awarding sequestration for as long as the sheriff thinks is necessary. Under section 4(3) of the 2002 Act a creditor is barred from petitioning for sequestration in respect of a debt which is covered by a DPP. So if the DPP is approved during the period of continuation granted by the sheriff under new subsection (3C) it would then be incompetent to sequestrate the debtor on that petition.

Section 28 – Abolition of summary administration

94.This section repeals various provisions of the 1985 Act with the effect that the Certificate of Summary Administration (COSA) procedure is abolished.

Section 29 – Non-vested contingent interest reinvested in debtor

95.This section inserts new section 31(5A) into the 1985 Act. Section 31(5) of that Act gives the trustee the right to non-vested contingent interests (potential assets) as if an assignation (transferring rights to those assets) of the interest had been executed by the debtor and intimation of the assignation made at the date of sequestration. This meant that the trustee continued to hold the right to these interests even after the debtor was discharged. The most common example would be where the debtor was the beneficiary under a will at sequestration, and the testator was still alive when the debtor was discharged. In such a case, if the debtor subsequently inherited an asset under the will, it would vest in the trustee.

96.This was not the case prior to section 97(4) of the Bankruptcy (Scotland) Act 1913. New section 31(5A) returns the law to the position as it was prior to the 1913 Act; non-vested contingent interests will no longer remain vested in the trustee after the debtor is discharged.

Section 30 – Debtor’s requirement to give account of state of affairs

97.This section inserts new section 43A into the 1985 Act which impose a duty on the trustee to require any debtor who is not discharged or who is subject to an IPO or IPA to give the trustee an account in writing providing details of income and expenditure every 6 months.

Section 31 – Restriction of debtor’s rights to appeal under sections 49(6) and 53(6) of the 1985 Act

98.Section 49(6) of the 1985 Act allows the debtor or any creditor to appeal against an adjudication by the trustee in sequestration on claims. Section 53(6) of that Act allows the same parties to appeal against the trustee’s remuneration and outlays.

99.This section inserts a new subsection (6A) into both sections introducing a restriction on the right of appeal by the debtor. The debtor can now appeal only if the debtor has a financial interest in the outcome of the appeal, such as a right to a reversion of funds after dividend.

Section 32 – Status of order on petition to convert protected trust deed into sequestration

100.This section inserts a new subsection (2A) into section 59C of the 1985 Act. It applies to the situation where a sheriff grants an application by a person in charge of proceedings akin to sequestration commenced in another EU country which requests the conversion of a protected trust deed granted by the debtor into sequestration of the debtor’s estate. The sheriff’s order granting that conversion is to be treated as if it is an award of sequestration granted by the AiB following a debtor application.

Section 33 – Power to provide for lay representation in sequestration proceedings

101.Section 33 inserts a new paragraph (m) into section 32(1) of the Sheriff Courts (Scotland) Act 1971 (which deals with the regulation of civil procedure in the sheriff courts). This new paragraph gives power to the Court of Session by Act of Sederunt (that is to say court rules) to permit a debtor to be represented by a person who is not a qualified advocate or solicitor at the hearing where the sheriff decides whether or not to award sequestration following a petition by the creditor (see section 12 of the 1985 Act). The Act of Sederunt may specify particular circumstances where a debtor can be represented by a non-lawyer at such hearings (for example, the debtor may have to satisfy particular criteria).

Section 34 – Treatment of student loans on sequestration

102.Debtors who are sequestrated in Scotland are currently discharged from their liabilities in respect of student loans. This section amends the enabling power in the Education (Scotland) Act 1980 to allow regulations made under that Act to exclude from discharge loans under that Act. It also directly excludes from discharge loans which have been made under the Education (Student Loans) Act 1990.

Section 35 – Certain regulations under the 1985 Act: procedure

103.This section provides that any regulations made by the Scottish Ministers under sections 5(2B)(a) or (4), 5A or 39A(4) of the Bankruptcy (Scotland) Act 1985 shall be subject to affirmative parliamentary procedure. In addition, the first regulations under paragraph 5 of Schedule 5 to the 1985, made after the amendments of that schedule by this Act are brought into force, are also subject to affirmative procedure.

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Text created by the Scottish Executive department responsible for the subject matter of the Act to explain what the Act sets out to achieve and to make the Act accessible to readers who are not legally qualified. Explanatory Notes were introduced in 1999 and accompany all Acts of the Scottish Parliament except those which result from Budget Bills

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