In an economic downturn the payment of debts becomes more important. It is therefore imperative that creditors make full and effective use of the remedies available to them. The Bankruptcy and Diligence Etc (Scotland) Act 2007, the largest piece of legislation passed so far by the Scottish Parliament, aims to modernise Scotland’s laws of bankruptcy and diligence, introducing a wide range of powers available to creditors in pursuing their debts while at the same time striking a balance with the rights of debtors.

In terms of bankruptcy reform the Act aligns Scotland with England and strives for a more US based approach, in which the “stigma” of bankruptcy is removed leading to a quicker return to business. This is done by reducing the bankruptcy period down from three years to one. The financial limit for bankruptcy has also been raised from £1500 to £3000.

The Act also introduces a new range of diligences, available to creditors to seize, money, movables and even land and buildings of the debtor for the payment of debts once a decree is obtained in their favour:

• Land Attachment is the most radical of the new diligences, it controversially has the effect of turning a non secured debt into a secured one. Land attachment is only competent for debts of £3000, hence the raising of the financial limit for bankruptcy and it is important to note that land attachment is not actionable against the principle dwelling house of the debtor.
• Money attachment will become available in May 2009. It allows debtors to attach money from a debtor’s premises and in practice will be carried out by Sheriff Officers.
• Residual attachment will be actionable against other movables, leases and intellectual property of the debtor.

The Act also provides for various pre-judgement mechanisms for recovering debt such as Interim Attachment which effects moveable property held outside the debtor’s dwelling house. The Act ensures fairness to the debtor by putting onus on the creditor to prove the reasonableness of the remedy as well as introducing mechanisms for recall.

For more comprehensive guide to the 2007 act visit the Accountant in Bankruptcies website (www.aib.gov.uk).

For further information on debt recovery please contact David Calder on 0131 226 8215 or email david.calder@mbmcommercial.co.uk