This article was originally published in CCTA Magazine.

The Scottish Government’s ministerial forward to Scotland’s stage two diligence review cites a number of factors for its necessity including the pandemic and cost-of-living crisis. Those with problem debt, including those with mental health issues, need greater support. There are also helpful suggestions to make some of the current enforcement options more effective for creditors. Following the consultation, a stage three review will take place.

The proposals include the following:

  • The current temporary embargo of six months on diligence for those in financial difficulty should be made permanent. A specific mental health process should also be introduced.
  • Those debtors who want to enter a trust deed should be given an information leaflet explaining its implications.
  • The “Debt Advice and Information Pack”, which explains the implications of debt and available advice, should be modernised.
  • The Minimal Asset bankruptcy process stipulates that it will be unavailable if a debtor’s cumulative assets exceed £1,500. This is to be removed as it disqualifies several debtors from being able to benefit from the debt relief which the procedure offers. A debtor is also excluded should assets be greater than £2,000 with a single asset having value of greater than £1,000. It is proposed the single asset provision be removed.
  • To maintain consistency throughout the UK, the current “Standard Financial Statement“, which is already being used, should be permanently adopted.
  • No change is suggested to the successful “Debt Arrangement Scheme” with the proposal for an early exit from it, should creditors accept composition of their debts by the debtor, being rejected.
  • The current judicial rate of interest on accrued debts should be reduced from 8% to 2%.
  • Provisions should be introduced for an “Information Disclosure Order” (IDO)
    • Creditors must first consider whether it is possible to proceed without an IDO. If not, then they must seek advice from a professional adviser and be in possession of a decree or equivalent with a charge for payment having been served.
    • The Sheriff Officer will have three months to submit the application if information is required from a third party.
    • To prevent asset concealment the debtor will not be notified in advance of the application.
  • Exceptional Attachment Orders, which permit the removal of property from the debtor’s home, will be unaltered other than increasing the value of sentimental assets, which cannot be attached, from £150 to £500.
  • Inhibitions, which can prevent the debtor from selling or mortgaging their heritable (freehold) property for five years, will remain.
  • Employers will be obliged to advise creditors within 21 days whether an earnings arrestment has been successful.
  • All arrestees, including banks, will be obliged to advise creditors if an arrestment is unusual.