Modification of the Bankruptcy (Scotland) Act 2016
Section 5 – Recall of sequestration: payment of interest
19.Section 5 modifies Part 2 of the 2016 Act, which deals with the award and recall of sequestration. These amendments make the payment of interest a pre-requisite of recall, except where the debt is paid in full within 6 months of the award of sequestration.
20.Section 30 of the 2016 Act sets out the process for recall of sequestration by the sheriff. Section 30(2) of the 2016 Act sets out that the sheriff may recall the award of sequestration if satisfied that, among other things, the debtor’s debts have been paid in full. Section 5(2) of the Act adds that the payment of any interest payable on the debtor’s debt and the payment of the outlays and remuneration of the interim trustee and of the trustee are included in the debtor’s debts to be paid before recalling an award of sequestration. Section 5(2) also modifies section 30(4) of the 2016 Act so that where the sheriff intends to recall an award of sequestration on the ground that the debtor has paid the debtor’s debts in full, the order recalling the award may not be made before the payment in full of any interest payable on the debtor’s debts.
21.Section 32 of the 2016 Act sets out further procedure where an application for recall of sequestration is made to AiB. Under section 32(3), the trustee must submit a statement to AiB containing the information set out in subsection (4) of that section, which includes a statement as to whether the debtor’s debts have been paid in full (including any outlays and remuneration of the interim trustee and of the trustee). Where the debtor’s debts have not been paid in full, the statement must also include an indication as to whether, in the opinion of the trustee, the debtor’s assets are likely to be sufficient to pay the debts in full (including the payment of the outlays and remuneration of the interim trustee and of the trustee) within 8 weeks of when the statement is made. Section 5(3) of the Act modifies section 32(4) of the 2016 Act so that interest payable on the debtor’s debts is included for the purposes of the statement as to whether the debtor’s debts have been paid in full and (where the debts have not been so paid) the indication as to whether the debtor’s assets are likely to be sufficient to pay the debts in full.
22.Section 34 of the 2016 Act sets out the process for recall of sequestration by AiB. AiB may recall the award of sequestration if satisfied that the debtor’s debts have been paid in full (including any outlays and remuneration of the interim trustee and of the trustee), and it is appropriate in all the circumstances. Section 5(4) of the Act adds that the payment of any interest payable on the debtor’s debts is included in the debtor’s debts to be paid before recalling an award of sequestration.
23.Section 35 of the 2016 Act applies where AiB is the trustee, and allows AiB to recall an award of sequestration if the debtor’s debts have been paid in full (including any outlays and remuneration of the interim trustee and of the trustee). Section 5(5) of the Act adds that the payment of any interest payable on the debtor’s debt is included in the debtor’s debts to be paid before recalling an award of sequestration.
24.Subsection (6) inserts a new section 37A into the 2016 Act which applies for the purpose of determining the amount of interest payable on the debtor’s debts in relation to a recall of an award of sequestration. New section 37A makes provision specifically in relation to the period between the date of sequestration and the date of the payment of the debt. It does not affect the amount a creditor is entitled to claim in respect of any contractual interest which may have accrued on the principal sum up to the date of sequestration. Section 37A(2) states that interest is payable between the date of sequestration and the date of payment of the debt at the rate specified in section 129(10) of the 2016 Act(2), subject to section 37A(3). Section 37A(3) applies if the whole of the debt is paid in full within 6 months after the date of the award of sequestration. In such cases, neither contractual nor statutory interest is payable on the debt in respect of the period between the date of sequestration and the date of the payment of the debt in order to be granted recall of sequestration.
25.If only part of the debt is paid within 6 months after the date of the award of sequestration, section 37A(4) clarifies that interest is payable on the whole of the debt in respect of that period (including any part of the debt already paid since the award) in accordance with section 37A(2).
See the glossary in the Policy Memorandum for definition of terms.
Whichever is the greater of (a) the prescribed rate at the date of sequestration and (b) the rate applicable to that debt apart from the sequestration.
