Accountant in bankruptcy revises reform proposals

Following consultations the Accountant in Bankruptcy (AIB) has announced changes to the proposed reforms of Scotland’s bankruptcy laws.

These changes relate mainly, but not exclusively, to Protected Trust Deeds (PTD’s). Scottish Ministers have been increasingly concerned due to the rising costs of same alongside the decreasing returns for creditors and for these reasons a minimum dividend had been proposed but concerns were expressed that setting such a dividend could lead to an increase in case failures and individuals becoming bankrupt instead.

Some of the features of these proposed changes are:-

1. a minimum debt level of £5000 ( £10,000 in joint PTD’s)
2. a new requirement on the Trustee to demonstrate that a Trust Deed is the most appropriate solution for the individual with the AIB having a new power if not satisfied to prevent it gaining Protected status
3. Trustees will no longer be able to charge their fees at an hourly rate but will have to charge a single, upfront fixed fee augmented by further remuneration based on a percentage of the funds ingathered through administration of the estate
4. Equity will be frozen in a dwelling house at the date the Trust Deed is granted

With regard to Debt Arrangement Scheme cases:-

1. interest and charges will be frozen on the date the application is submitted to creditors ( which will be a welcome development to individuals affected by high interest lending)
2. the possibility of composition after the debt payment programme has subsisted for 12 years and 70% of debt has been paid
3. the payment break period will be made flexible moving from a fixed 6 month period to up to 6 months

For creditor petitions, AIB has dropped the idea of awarding non contested creditor petitions principally because they are always contentious and there would be no benefit for any party in the change.

AIB has also abandoned the plan to exclude debts incurred in the 12 weeks prior to sequestration as it was felt it would be almost impossible to introduce an effective process for this measure that did not give rise to unfair preferences for some creditors.

Anne Hunter, 1 March