Draft Regulations laid before the Scottish Parliament under section 225(4)(a) of the Bankruptcy (Scotland) Act 2016, section 62(4) of the Debt Arrangement and Attachment (Scotland) Act 2002, and section 72(2) and (3)(a)(iib),(iic) and (b) of the Bankruptcy (Scotland) Act 1985 for approval by resolution of the Scottish Parliament.

2018 No.

Bankruptcy
Debt

The Common Financial Tool (Scotland) Regulations 2018

Made

Coming into force

The Scottish Ministers make the following Regulations in exercise of the powers conferred by sections 4(2)(b), 89, 170(1)(d)(ii), 194(1) and (3), 224(1) and 225(2) of the Bankruptcy (Scotland) Act 20161 (“the 2016 Act”), sections 2(3)(d), 7(2)(bd) and 62(2)(a) of the Debt Arrangement and Attachment (Scotland) Act 20022 (“the 2002 Act”), sections 5C(2)(b), 5D, 71C, 72(1A) and paragraph 5 of schedule 5 of the Bankruptcy (Scotland) Act 19853 (“the 1985 Act”), and all other powers enabling them to do so.

In accordance with section 225(4)(a) of the 2016 Act, section 62(4) of the 2002 Act4 and section 72(2) and (3)(a)(iib), (iic) and (b) of the 1985 Act5, a draft of this instrument has been laid before and approved by resolution of the Scottish Parliament.

Citation and commencement1

These Regulations may be cited as the Common Financial Tool (Scotland) Regulations 2018 and come into force on 29th October 2018.

Interpretation2

In these Regulations –

  • “the 1985 Act” means the Bankruptcy (Scotland) Act 1985;

  • “the 2016 Act” means the Bankruptcy (Scotland) Act 2016;

  • “the 2011 DAS Regulations” means the Debt Arrangement Scheme (Scotland) Regulations 20116; and

  • “AiB” means the Accountant in Bankruptcy (within the meaning given by section 199 of the 2016 Act).

Amendment of the Bankruptcy (Scotland) Regulations 20163

1

The Bankruptcy (Scotland) Regulations 20167 are amended as follows.

2

In regulation 2(1) (interpretation)—

a

omit the definition of “Common Financial Statement”;

b

after the definition of “debtor’s contribution” omit “and”; and

c

after the definition of “the Keeper” insert—

  • “single financial guidance body” means the body established under section 1 (the single financial guidance body) of the Financial Guidance and Claims Act 20188 (irrespective of any changes to the name of that body); and

  • “Standard Financial Statement” means the style and format for income and expenditure categories under that title (and, where relevant, related spreadsheets, budget sheets, trigger figures, guidance materials and notes) published by the Money Advice Service9 or by the single financial guidance body.

3

In regulation 5(1)(g) (persons who may not be approved money advisers) for “from the Money Advice Trust to use the Common Financial Statement” substitute “authorising their use of the Standard Financial Statement, where such a licence is required”.

4

In regulation 15 (common financial tool)—

a

in paragraph (1) for “Common Financial Statement” substitute “Standard Financial Statement”;

b

in paragraph (2) for “Common Financial Statement” each time it occurs substitute “Standard Financial Statement”;

c

in paragraph (3)(b) for “in accordance with regulation 16 towards contingencies which may arise” substitute “as savings in accordance with and up to the maximum permitted by the Standard Financial Statement”; and

d

in paragraph (5) for “Common Financial Statement” substitute “Standard Financial Statement”.

5

In regulation 16 (common financial tool: contingency allowance)—

a

paragraph (1) is revoked; and

b

in paragraph (2), for “under paragraph (1)” substitute “as savings as mentioned in regulation 15(3)(b)”.

6

In regulation 17(1)(a) (common financial tool: supporting statements and evidence) for “Common Financial Statement” substitute “Standard Financial Statement”.

7

In regulation 18 (Money Advice Trust licence requirements: report)—

a

for “Common Financial Statement” substitute “Standard Financial Statement”;

b

for “Money Advice Trust” substitute “Money Advice Service or single financial guidance body”; and

c

for “the Trust” substitute “the body that imposed the licence requirement”.

8

In the title to regulation 18, for “Money Advice Trust” substitute “Standard Financial Statement”.

9

In schedule 1 (forms)—

a

in Form 1 (debtor application), for section 7 (income) and section 8 (expenditure) substitute sections 7 and 8 set out in schedule 1 of these Regulations; and

b

in Form 23 (debtor’s account of current state of affairs) for section Q6 (income and expenditure) substitute section Q6 set out in schedule 2 of these Regulations.

Amendment of the Protected Trust Deeds (Forms) (Scotland) Regulations 20164

In the schedule of the Protected Trust Deeds (Forms) (Scotland) Regulations 201610, for Form 2A (income and expenditure) substitute Form 2A set out in schedule 3 of these Regulations.

Amendment of the Debt Arrangement Scheme (Scotland) Regulations 20115

1

The 2011 DAS Regulations are amended as follows.

2

In regulation 2(1) (interpretation: general)—

a

omit the definition of “Common Financial Statement”; and

b

after the definition of “sheriff”, insert—

  • “the single financial guidance body” means the body established under section 1 (the single financial guidance body) of the Financial Guidance and Claims Act 2018 (irrespective of any changes to the name of that body);

  • “Standard Financial Statement” means the style and format for income and expenditure categories under that title (and, where relevant, related spreadsheets, budget sheets, trigger figures, guidance materials and notes) published by the Money Advice Service or by the single financial guidance body;

3

In regulation 20(2B)(a) (application for approval) for “Common Financial Statement” substitute “Standard Financial Statement”.

4

In schedule 1 (forms), in Form 1 (application for approval of a debt payment programme: individuals), in section 5 (financial statement of the debtor) for the material from the heading “5. Financial statement of the debtor(s) (the Common Financial Tool)” to the end of the material before section 5b substitute section 5a set out in schedule 4 of these Regulations.

Sequestrations and trust deeds before 29th October 20186

1

Except as mentioned in paragraphs (2) to (4) and (7), these Regulations have no effect in relation to—

a

sequestrations for which the petition was presented or the debtor application was made before, or

b

trust deeds executed before,

29th October 2018.

2

These Regulations have effect where—

a

an application is made on or after 29th October 2018 under section 95 of the 2016 Act to vary or quash a debtor contribution order; or

b

a trustee is considering on or after that date under that section whether to vary or quash a debtor contribution order.

3

These Regulations have effect where—

a

an application is made on or after 29th October 2018 under section 32F of the 1985 Act11 to vary or quash a debtor contribution order; or

b

a trustee is considering on or after that date under that section whether to vary or quash a debtor contribution order.

4

These Regulations have effect where—

a

an application is made on or after 29th October 2018 under section 32(4) of the 1985 Act12 for variation of an income payment order,

b

an application is made on or after that date under section 32(4G)(b) of the 1985 Act13 for variation of an income payment agreement, or

c

a trustee is considering entering into a written agreement to vary an income payment agreement under section 32(4G)(a) of the 1985 Act on a change in the debtor’s circumstances.

5

For the avoidance of doubt paragraphs (2) to (4) do not prevent a trustee, AiB or a sheriff having regard to other factors, including the amount initially determined by the order or provided for in an income payment agreement (or any extant variation of either).

6

The adoption of the Standard Financial Statement as the common financial tool is not itself a change in the debtor’s circumstances for the purposes of section 95 of the 2016 Act or sections 32(4) or 32F of the 1985 Act.

7

Schedule 5 (which modifies saved regulations for sequestration and trust deeds before 30th November 2016) has effect subject to paragraphs (1) to (6).

Debt payment programmes before 29th October 20187

1

Except as mentioned in paragraphs (2) and (3), these Regulations have no effect in relation to debt payment programmes in respect of which an application for approval was made under the 2011 DAS Regulations before 29th October 2018.

2

Where an application is made on or after 29th October 2018 for variation of a debt payment programme on a material change in the circumstances of a debtor, the DAS Administrator must have regard to the Standard Financial Statement.

3

In so applying the Standard Financial Statement, for the avoidance of doubt—

a

this regulation does not prevent the DAS Administrator having regard to other factors, including the payments previously made under the debt payment programme; and

b

the Standard Financial Statement is not itself a material change in the circumstances of the debtor for the purposes of regulation 37(1) of the 2011 DAS Regulations.

4

In this regulation, “the DAS Administrator” has the following meaning given in the 2011 DAS Regulations—

a

the Scottish Ministers; or

b

any person or body who may exercise the functions of the Scottish Ministers by virtue of an order made under section 8 (functions of the Scottish Ministers) of the Debt Arrangement and Attachment (Scotland) Act 200214.

NameAuthorised to sign by the Scottish MinistersSt Andrew’s House,Edinburgh

SCHEDULE 1Bankruptcy (Scotland) Regulations 2016 – Form 1(Debtor Application)

Regulation 3(9)(a)

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SCHEDULE 2Bankruptcy (Scotland) Regulations 2016 – Form 23(Debtor’s Account of Current State of Affairs)

Regulation 3(9)(b)

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SCHEDULE 3Protected Trust Deeds (Forms) (Scotland) Regulations 2016 - Form 2A(Income and Expenditure)

Regulation 4

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SCHEDULE 4Debt Arrangement Scheme (Scotland) Regulations 2011 - Form 1(Application for approval of a debt payment programme: individuals)

Regulation 5(4)

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SCHEDULE 5Sequestrations and trust deeds before 30th November 2016

Regulation 6(7)

Modification of saved regulations1

The Common Financial Tool etc. (Scotland) Regulations 201415 and the Bankruptcy (Money Advice and Deduction from Income etc.) (Scotland) Regulations 201416 continue to apply to—

a

sequestrations as regards which the petitions was presented or the debtor application was made before; or

b

trust deeds executed before,

30th November 2016 as if paragraphs 2 and 3 below applied.

The Common Financial Tool etc. (Scotland) Regulations 20142

1

In regulation 2 (interpretation)—

a

omit the definition of “Common Financial Statement”;

b

after the definition of “common financial tool” omit “and”; and

c

after the definition of “debtor’s contribution” insert—

  • “single financial guidance body” means the body established under section 1 (the single financial guidance body) of the Financial Guidance and Claims Act 201817 (irrespective of any changes to the name of that body); and

  • “Standard Financial Statement” means the style and format for income and expenditure categories under that title (and, where relevant, related spreadsheets, budget sheets, trigger figures, guidance materials and notes) published by the Money Advice Service18 or by the single financial guidance body.

2

In regulation 3 (common financial tool)—

a

in paragraph (1), for “Common Financial Statement” substitute “Standard Financial Statement”;

b

in paragraph (2), for “Common Financial Statement” each time it occurs substitute “Standard Financial Statement”;

c

in paragraph (3)(b), for “in accordance with regulation 3A towards contingencies which may arise” substitute “as savings in accordance with and up to the maximum permitted by the Standard Financial Statement”; and

d

in paragraph (5), for “Common Financial Statement” substitute “Standard Financial Statement”.

3

In regulation 3A (common financial tool: contingency allowance)—

a

paragraph (1) is revoked; and

b

in paragraph (2) for “under paragraph (1)” substitute “as savings as mentioned in regulation 3(3)(b)”.

4

In regulation 4(1)(a) (common financial tool: supporting statements and evidence) for “Common Financial Statement” substitute “Standard Financial Statement”.

5

In regulation 5 (Money Advice Trust licence requirements: report)—

a

for “Common Financial Statement” substitute “Standard Financial Statement”;

b

for “Money Advice Trust” substitute “Money Advice Service or single financial guidance body”; and

c

for “the Trust” substitute “the body that imposed the licence requirement”.

6

In the title to regulation 5, for “Money Advice Trust” substitute “Standard Financial Statement”.

The Bankruptcy (Money Advice and Deduction from Income etc.) (Scotland) Regulations 20143

1

In regulation 2 (interpretation) after the definition of “common financial tool” insert—

  • “single financial guidance body” means the body established under section 1 (the single financial guidance body) of the Financial Guidance and Claims Act 2018 (irrespective of any changes to the name of that body); and

  • “Standard Financial Statement” means the style and format for income and expenditure categories under that title (and, where relevant, related spreadsheets, budget sheets, trigger figures, guidance materials and notes) published by the Money Advice Service or by the single financial guidance body.

2

In regulation 4(1) (persons who may not be approved money advisers), for sub-paragraph (g) substitute—

g

persons without a licence authorising their use of the Standard Financial Statement, where such a licence is required;

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations amend the method for determining an appropriate amount of a living debtor’s income to be paid to a trustee after sequestration of the debtor’s estate, known as the “common financial tool” in the Bankruptcy (Scotland) Act 2016 (“the 2016 Act”) and make similar changes for protected trust deeds and the debt arrangement scheme (“DAS”).

These Regulations change the method to be used as the common financial tool, from the Common Financial Statement (“the CFS”) published by the Money Advice Trust, to the Standard Financial Statement (“the SFS”), currently published by the Money Advice Service. They also contain provision in anticipation of the replacement of the Money Advice Service with the single financial guidance body by the Financial Guidance and Claims Act 2018.

Regulation 3 amends the Bankruptcy (Scotland) Regulations 2016 (“the 2016 Regulations”) to replace references to the CFS and the Money Advice Trust with references to the SFS and the Money Advice Service or single financial guidance body.

The requirement that money advisers hold a licence from the Money Advice Trust to use the CFS is replaced with a requirement to hold a licence authorising them to use the SFS (where such a licence is required); provision that the CFS is the common financial tool is replaced with the SFS, with debtor contributions determined in accordance with expenditure categories and trigger figures provided by the SFS; provision allowing a debtor to retain additional income towards contingencies is removed as savings are allowed as part of the SFS. Sections 7 and 8 of bankruptcy Form 1 (debtor application) and section Q6 of Form 23 (debtor’s account of current state of affairs) are replaced with new versions to reflect the new income and expenditure categories in the SFS.

Regulation 4 amends the Protected Trust Deeds (Forms) (Scotland) Regulations 2016 to replace Form 2A (the statement of the debtor’s income and expenditure to be provided to creditors) with a new version which reflects the income and expenditure categories of the SFS.

Regulation 5 amends the Debt Arrangement Scheme (Scotland) Regulations 2011 to replace a requirement that debtor applications for debt payment programmes include a statement of income and expenditure in the style and format of the CFS, with that of the SFS. Section 5a (the financial statement of the debtor) of Form 1 (application for approval of a debt payment programme: individuals) is replaced with a new version which reflects the income and expenditure categories of the SFS.

These Regulations come into force on 29th October 2018.

Regulation 6 provides that changes to the common financial tool made by these Regulations have no effect in relation to sequestrations where the petition was presented or debtor application made, or trust deeds executed, before 29th October 2018. This is subject to an exception where after that date there is an application, or a trustee is otherwise considering, to vary or quash a debtor contribution order (or income payment order or agreement). Regulation 6 clarifies that the application of the Regulations in those circumstances does not prevent the relevant decision maker from having regard to other factors, and that the adoption of the SFS does not itself constitute a change in the debtor’s circumstances.

Schedule 5 modifies the Common Financial Tool etc. (Scotland) Regulations 2014 and the Bankruptcy (Money Advice and Deduction from Income etc.) (Scotland) Regulations 2014 to make provision for sequestrations initiated, or trust deeds executed, before 30th November 2016.

Regulation 7 makes provision regarding the effect of the changes to the common financial tool for debt payment programmes in DAS where an application for approval was made before 29th October 2018, the effect of which is similar to the provision in regulation 6.

A Business and Regulatory Impact Assessment has been prepared for these Regulations. Copies can be obtained from the Accountant in Bankruptcy’s website: http://www.aib.gov.uk.