The Bill includes proposals to make a number of important changes to current bankruptcy legislation, as set out below. These are temporary changes for the period the bill is in force – initially five months, but with the possibility of extension in the same way as the first Coronavirus Act.
The Coronavirus (Scotland) (No.2) Bill seeks to raise the minimum debt threshold from £3000 to £10,000 while reducing the application fee in full administration bankruptcies from £200 to £150.
And the upper threshold for accessibility to minimal asset process (MAP) will be raised from £17,000 to £25,000 to help people in debt avoid a lengthy bankruptcy process.
Bill details:
Minimal Asset Procedure (MAP) Bankruptcy Applications: The Bill makes a number of changes regarding administration:
- the debt ceiling is increased from £17,000 to £25,000:
- student debt is exempted from the debt ceiling calculation; and
- MAP application fees are removed for those whose sole income is derived from benefits, and reduced to £50 from the current £90 for all others.
Full Administration Bankruptcy: Bankruptcy applications which do not satisfy MAP criteria are subject to full administration. Currently, the application fee in full administration bankruptcies is £200, this will be reduced to £150.
Qualified Creditors: Creditors may petition for the sequestration of individuals / entities when owed at least £3000. This minimum debt threshold will be increased to £10,000.
Bankruptcy Administration: Building on the provisions of the Coronavirus (Scotland) Act, the new bill makes a number of changes to expedite bankruptcy administration process:
- the deadline for trustees to send their DCO proposals to AiB in creditor petition bankruptcies is increased from 6 to 12 weeks;
- virtual statutory meetings of creditors are permitted;
- all statutory forms detailed in the Bankruptcy (Scotland) Regulations can be completed with electronic signatures; and
- bankruptcy circulars may be sent electronically with the assent of the recipient.
Minister for Business, Fair Work and Skills, Jamie Hepburn, said “We are aware of the ongoing financial difficulties faced by individuals during this unpredictable time; and also recognise the restrictions placed on those administering the insolvency process and the challenges this can pose”
“I hope these additional temporary measures will help – and we will continue to look at what more might be required as we start to think about the coming months.”
Chartered Accountants Wylie & Bisset says that Scots facing financial hardship as a consequence of the coronavirus pandemic look set to benefit from the country’s second emergency coronavirus bill.
Donald McKinnon, Managing Partner at Wylie & Bisset, said “This bill will assist many Scots facing bankruptcy or financial uncertainty as a result of their workplaces being closed down due to Covid-19.”
“There are essentially two types of personal sequestrations: one where a debtor applies themselves and one where a creditor applies to sequestrate a person. This bill seeks to increase the current £3000 threshold for a creditor application to £10,000.”
“At the same time, the application fee for someone seeking to sequestrate themselves will be reduced from £200 to £150 – a measure to assist people entering the process, where before the cost may have been considered a barrier.”
“It’s worth noting that, with creditor petitions set to move from £3000 to £10,000, this still does not prevent someone from applying for their own sequestration, as opposed to a creditor petitioning against them.
“Both measures can be seen as assisting individuals facing financial hardship as a consequence of the coronavirus pandemic by offering an element of protection from creditors, but also making it easier to action themselves.”
Emergency legislation intended to introduce temporary measures until 30th September, following which it will be subject to review and possible extension, the Coronavirus (Scotland) (No.2) Bill, which is likely to come into force by the end of the month, is designed to complement the measures already introduced in last month’s emergency coronavirus bill, which extended the personal moratorium to six months.