Views sought as debt solution reforms near conclusion

Scottish Government proposals for reforms to the various debt solutions in place in Scotland have been put out to consultation, as ministers move towards finalising the changes to be made.

The exercise follows a policy review of formal debt recovery mechanisms (diligence) and the statutory debt solutions of moratorium protection, bankruptcy, protected trust deeds and the Debt Arrangement Scheme.

It has already resulted in amendments to the Bankruptcy Regulations, introduced last year, which included lowering the cost of access to bankruptcy and removing fees for the most financially vulnerable.

A second stage then involved the creation of three dedicated working groups to look at key aspects of current statutory debt solutions, drawing on a wide range of expertise and knowledge from all sectors involved in the debt landscape. Where no consensus was reached on the best way forward given the complex issues involved, the key arguments and information were set out for ministers to consider further.

The Scottish Government’s response to these policy reviews, and its proposals for future action, are now open to consultation over an abbreviated timeframe of eight weeks. Feedback received during this consultation will enable ministers to finalise changes and plan for these to be taken forward, either through legislation, guidance or working with stakeholders. 

Proposals include:

• specific debt moratorium provisions for people with mental health issues;
• removing the £1,500 debt threshold for minimal asset process bankruptcy, and applying a simple total asset ceiling, reviewing the current £2,000 figure;
• adopting the Standard Financial Statement used I the rest of the UK as the tool to assess income and expenditure for the propose of the various debt solutions;
• placing some of the processes in the voluntary protected trust deed protocol on a statutory footing;
• exploring options for greater flexibility in delivering early discharge from a protected trust deed;
• proceed with the introduction of information disclosure orders, for which creditors can apply as part of the diligence process;
• removing restrictions on when a money attachment can be executed, and exploring options for more flexibility around diligence against earnings.

Access the consultation here. The deadline for responses is 7 October 2022.