Reforms to bankruptcy and diligence published
22 Nov 05
Unified debt recovery system will mean more effective enforcement, says minister
Legal reforms to help individuals and small businesses get back on their feet and move on after debt problems were published today.
Measures contained in the Bankruptcy and Diligence etc (Scotland) Bill will, according to the Executive, provide for more effective enforcement against "won't pay" debtors, help and support for "could pay" debtors, and fair treatment for "can't pay" debtors.
Other provisions will make it easier for business borrowers and lenders to have a flexible and effective security for loans.
Streamlining bankruptcy
Key reforms include reducing the bankruptcy period from three years to one year; taking debtor applications out of the court system; and limiting the right of creditors to decide to sell or dispose of the debtor's family home to within three years after bankruptcy.
Deputy Enterprise Minister Allan Wilson said that the bill will help make Scotland a good place in which to do business.
He said: "We want to help people to be able to clear their feet and get on with their lives and businesses after a period of bankruptcy. Entrepreneurs willing to take sensible risks are essential to a strong and dynamic economy. We want to create the right climate to enable those who don't succeed the first time round an early chance to move on and try again.
"At the same time we don't want bankruptcy to be viewed as an easy option. It is vital that we have checks and balances in place to protect the interests of creditors and ensure debt recovery. There must also be tough sanctions in place to deal with the minority of bankrupts who are a particular risk."
Orders known as "bankruptcy restriction orders" will continue restrictions on potentially fraudulent or culpable bankrupts after their discharge.
Overseeing diligence
The bill also proposes reforms of floating charges granted by companies. A new Scottish Register of Floating Charges, to be held by the Keeper of the Registers, will make it easier for lending institutions to assess the financial position of a company.
Changes in the law of diligence - the processes for enforcing orders for payment - include creating a new protected minimum balance on arrested funds in bank accounts, and the establishment of a new public body, the Scottish Civil Enforcement Commission, to oversee and improve the accountability of a new single profession of court messenger replacing the professions of messengers-at-arms and sheriff officers.
Mr Wilson added: "By reforming bankruptcy and diligence together, we are aiming for a unified system of debt recovery to be used against those who can pay but won't pay; debt management for those who can pay, but need more time and extra support to do so; and debt relief for those who can't pay even with more time and extra help."
The bill can be viewed at http://www.scottish.parliament.uk/business/bills/billsInProgress/bankruptcy.htm .