Bankruptcy

The Scottish Parliament today passed the bankruptcy and diligence etc (scotland) Bill.  As was apparent from Newsnight Scotland there is a furore about land attachments – a new form of debt enforcement that will allow a creditor to attach land (hence the Ronseal type name, land attachment) and houses.  The debt threshold for this is £3,000.  There has been much criticism of this reform because the creditor may sell a house for a £3000 debt. 

The critics are playing this up and intend to make political capital of it come the election.  They ignore a number of things.  First, Scots law allows creditors to attach land at the moment.  The mechanism is known as adjudication.  It allows creditors to eject debtors, let the property, and – yes – ultimately the house is acquired by the creditor.  This process applies mechanically after a period of time through a court order known as the declarator of expiry of the legal.  There is no minimum debt threshold for adjudications.  The new proposals have safeguards: the debt threshold, various protections for debtors and family members in that the creditor has to apply to court for a power of sale that will not automatically be granted unless the sheriff is satisfied various safeguards in relation to alternative accommodation and the treatment of the debtor’s family.    These safeguards include the power of a debtor to enter a debt arrangement scheme which imposes a moratorium on any debt enforcement.

Second, at the moment because the process for attaching land is problematic the creditor who realises the only substantial asset of value the debtor has is a house makes the debtor bankrupt.  This loses the debtor far more than the house.  They lose various items of furniture, the car, a portion of income and any assets they acquire while an undischarged bankrupt.  Bankruptcy remains an option under the new legislation, and indeed will be more attractive if those opposing land attachments and seeking to increase the limit had their way.  Let us say, for example, that the limit is lifted to £10,000. The limit for bankruptcy is £3,000.  Addiitonally, bankruptcy is a summary process – meaning that it is granted automatically with no consideration of time to pay or the like.  A creditor is owed £4,000.  The creditor says.  Well, I can’t do land attachment.  Therefore I’ll make the person bankrupt and get their house, the car and other assets and the debtor is made homeless.  However, with land attachment the debtor could argue – well I’ll enter a debt arrangement scheme to pay back my debt over time, and the debtor stays in the house.

As is usual when things are difficult the relevant government minister declined to appear on newsnight Scotland.  This was a good thing as he appeared to find the central concepts he was dealing with in the legislation rather difficult.  His role as defender of the legislation was taken by back bench MSP and advocate Gordon “Crackerjack” Jackson (so named because he generally only arrives at 5 pm for the votes, and “it’s 5 o’clock, it’s Crackerjack”).  

And Fletcher’s left the team unchanged.  Well, whoop de doo  What odds an Aussie win within 4 days?

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About loveandgarbage

I watch the telly and read when not doing law stuff and plugging my decade and a half old unwatched Edinburgh fringe show.
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