The Bankruptcy & Diligence Etc (Scotland) Act 2007

walletThe above piece of Scottish legislation has fundamentally altered the law relating to both bankruptcy and diligence.   Insofar as bankruptcy is concerned, debtors will be automatically discharged from bankruptcy after one year (as opposed to the previous three year period) and, in addition, there has been introduced the concept of “bankruptcy restriction orders” which are similar to the company director’s disqualification regime where debtors will find themselves disqualified for a number of years from acting as directors and the like.   These orders are likely to apply where there has been unfit behaviour on the part of a debtor.   Further, any heritable property will automatically revert to a debtor after three years if the trustee has done nothing with it during that period. 

However, there have been some key changes to the law of diligence in Scotland.   Firstly, we now have what is known as a “money attachment” whereby sheriff officers can attach money held by a debtor within their premises.   That cannot relate to money kept in a dwellinghouse nor held in a bank account.   It is perhaps unlikely however that debtors will have a biscuit tin full of cash stashed under their beds!

There are also residual attachments and these relate to assets such as intellectual property.    

Finally, we have land attachments.   This, once it comes into force, will enable the forced sale of a debtor’s house.   The court will not allow this to be done however if it considers this would be unduly harsh in the circumstances.    The procedure involves attachment of the land followed by a court application for a subsequent sale.   Once the sale has been carried out, the balance of the sale proceeds less the sums due in respect of the debt will be refunded to the debtor. 

These changes certainly extend the range of options available to a creditor although it remains to be seen just how effective they will prove to be in practice.

For further information contact Duncan Love, Senior Litigation Partner at James & George Collie. Duncan specialises in civil court work including debt recovery and insolvency related matters – his email address is d.love@jgcollie.co.uk

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