Meet The Accountant Personal and Corporate Insolvency in Scotland

Case Operations Update

General Statistical Update Debtor Applications for Bankruptcy AiB In-house Management Update John Cook Head of Case Operations

General Statistical Update John Cook Head of Case Operations Total 07/08 Total 08/09 YTD 09/10 Projected 09/10 Bankruptcy Awards Protected Trust Deeds DAS DPPs Corporate Insolvencies

Awards By Type Total 07/08 Total 08/09 Projected 09/10 Debtor Application % % % Creditor Petition % % % Trustee Petition 412 7% 442 3% % John Cook Head of Case Operations

Debtor Bankruptcy Applications Regulations commenced April 2008 LILA Route Checking Procedure Ongoing Administration John Cook Head of Case Operations

Debtor Applications Statistics Total 08/09 YTD 09/10 Projected 09/10 Net Applications LILA Awards A.I Awards Rejections Cases Converted John Cook Head of Case Operations

In House Case Management Total 07/08 Total 08/09 Heritage£1.16m£1.97m Other Assets£0.10m£0.755m Contributions (IPAs from April 08) £0.43m£0.84m John Cook Head of Case Operations

Insolvency Policy

Policy Development Branch Since 2007 we have had policy responsibility for all non- operational policy related issues; Provide Ministers with policy advice on legislation; Liaise with stakeholders, other areas of SG, with UK Government and EU; Major work associated with implementation of the Bankruptcy and Diligence etc. (Scotland) Act 2007; Conduct reviews of how legislation is working in practice; Develop new legislation. Sharon Bell Head of Policy Development

The Impact of the Recession Ministers looking for ways to help Less credit and lower equity = fewer options for dealing with debt Impact on businesses and employment Increase in debt problems in the working economy “Iceberg bankrupts” Sharon Bell Head of Policy Development

‘Serving the People of Scotland’ In January we supported the Debt Action Forum - provided secretariat support - provided reports and background information AiB Business Plan - the following key areas were recognised under ‘Developing Policy’ : –Continue to implement the Bankruptcy and Diligence etc. (Scotland) Act 2007 –Develop and implement Bankruptcy changes –Review Corporate Insolvency in Scotland Sharon Bell Head of Policy Development

Diligence Bankruptcy and Diligence etc. (Scotland) Act 2007

Diligence Commenced on 1 April 2008: part 6 - diligence on the dependence, part 7 -interim attachment, part 9 - changes to arrestment of earnings, part 12 - changes to summary warrant, time to pay and charge to pay Commenced on 22 April 2009: part 5 - changes to inhibition and part 10 - changes to arrestment Working to commence from late October/early November 2009: part 8 – money attachment, April 2010 part 14 – admiralty actions and part 15 – actions for removing amend Earnings Arrestment Regulations to introduce new deduction tables Sharon Bell Head of Policy Development

Allows attachment of money owned by the debtor (but not money in a dwelling house) Makes provision for the process of money attachment Provides for the issue by the sheriff of a Payment Order Once a payment order has been granted the sheriff officer will be authorised to bank cheques and distribute funds to the creditor To be commenced late October or early November 2009 Diligence Money Attachment Sharon Bell Head of Policy Development

Makes changes to the Administration of Justice Act 1956, the law relating to the admiralty actions and the arrestment of ships Introduces definition of maritime lien and clarifies what constitutes an admiralty action Clarifies jurisdiction and provides for where an arrestment of a ship and/or its cargo can be arrested Diligence Admiralty Actions Sharon Bell Head of Policy Development

Part 15 applies general rules for actions of removing without changing the legal grounds on which a person can be removed The procedure and practice will be set down in Act of Sederunt The service of a charge for removing will be introduced before any removing can take place The charge will effectively give 14 days notice of removing (although this period can be varied or dispensed with by the sheriff where circumstances warrant it) Diligence Actions for Removing Sharon Bell Head of Policy Development

Land attachment introduced by 2007 Act to replace adjudication for debt Not yet commenced Consultation to be issued shortly in recognition of the commitment to exempt the main dwelling house from land attachment Diligence Land Attachment Sharon Bell Head of Policy Development

Bankruptcy: DAS LILA route Protected Trust Deeds Debt Action Forum Sharon Bell Head of Policy Development

Debt Arrangement Scheme Still believe that change is needed to improve access Earlier this year - proposed legislation to improve DAS Now - Consultation on the details Aim to report in December 2009 Changes not expected until Spring 2010 Sharon Bell Head of Policy Development

DAS Number of Approved DPPs Sharon Bell Head of Policy Development

DAS Approved Money Advisers There are currently 104 approved money advisers in Scotland. 60% of approved money advisers submitted DPPs during the last year. Sharon Bell Head of Policy Development

DAS Value of Debts in the DPPS On average, debtors owe £24,362 and DPPs are set up to run for just over 8 years. The average monthly payment in a DPP is £246. Payments range from just under £10 to around £1,500 per month. Sharon Bell Head of Policy Development

DAS Length of DPPS Sharon Bell Head of Policy Development

DAS Consultation Access to DAS Administration Consent Rules & Fair and Reasonableness Debt Payment Programmes Single Debts Payment Distribution Sharon Bell Head of Policy Development

LILA route into Bankruptcy Findings of the Review: The LILA route is effective in providing debtors, who could not previously access bankruptcy, with debt relief The number of individuals applying for their own bankruptcy has increased significantly since the introduction of the LILA criteria 95% of the people using the LILA route are on benefits More females than males satisfied the LILA criteria when applying for bankruptcy Sharon Bell Head of Policy Development

LILA Bankruptcies Value of Debt Sharon Bell Head of Policy Development On average, debtors owe £17,288

LILA Bankruptcies Top 10 Creditors Sharon Bell Head of Policy Development

Bankruptcies Future? Unlikely to change the Debtor Application Fee for Unlikely to change the LILA criteria Debt Action Forum report and SG response Sharon Bell Head of Policy Development

Protected Trust Deeds Some findings of the review 2008 changes introduced have had no effect on the number of PTDs registered Average total debt included in a PTDs of £32,652 Average estimated dividend proposed to creditors in individual PTDs is 17p in the pound Sharon Bell Head of Policy Development

PTD Main Creditors Sharon Bell Head of Policy Development

PTD Debtor Income Profile Sharon Bell Head of Policy Development

PTD IP Fees Sharon Bell Head of Policy Development

Average anticipated trustee fees and outlays amount to £4,937 Total debt write off for PTDs registered in the year 2008/09 is and estimated £205m Over 33% change in first 6 – 12 month PTD findings continued Sharon Bell Head of Policy Development

PTDs the Future? Minister will meet with IPs and Governing Bodies Consultation – which will look at PTDs: Having a different term – 3yr to 5yr Providing dividends more regularly to creditors Excluding certain assets Trustee Fee to outcome relationship Where AiB becomes the Trustee Legislative changes – subject to consultation Sharon Bell Head of Policy Development

Consolidation of Bankruptcy Acts Bring the 1985,1993 and 2007 Acts into one consolidated Act Reformat, renumber and modernise language used Update all forms and regs Update guidance Sharon Bell Head of Policy Development

Debt Action Forum Sharon Bell Head of Policy Development

Debt Action Forum Short life working group of academics and experts from a diverse group of stakeholders Chaired by Fergus Ewing MSP, Minister for Community Safety Wide ranging remit to look at debt solutions in light of current financial climate Sub-group with specific focus on repossessions Final report published in June 2009 Sharon Bell Head of Policy Development

Ministerial led forum- members by Ministerial invite Discussed a range of debt related issues including: –Trust Deeds –Protecting Debtors –Heritage –Debt Collection and Debt Purchase –Access to Bank Accounts –Advice Provision –The debtor’s car –Repossessions Sharon Bell Head of Policy Development Debt Action Forum

Debt Action Forum Scottish Government Response Extending the protection to the family home in bankruptcy to trust deeds Extending the period for which a sheriff may postpone the sale of a family home from one to three years Introducing the requirement for trustees in bankruptcy and trust deeds to notify the local authority of the sale of a family home Excluding specified assets from protected trust deeds with the creditors agreement Sharon Bell Head of Policy Development

Extending the access to bankruptcy by allowing a certified route that is fair and open Exempting any essential vehicle valued at £3,000 or less from vesting Introducing new grounds for bankruptcy restrictions to encourage debtors to take responsibility for their on going liabilities Removing the requirement to advertise bankruptcy in the Edinburgh Gazette Sharon Bell Head of Policy Development Debt Action Forum Scottish Government Response

Repossessions Potential area for legislation SG colleagues will be looking at the recommendations of the Repossessions Report Build on the protection available through the Mortgage Rights (Scotland) Act 2001 in repossession cases. Lenders to show that they have considered every reasonable alternative Sharon Bell Head of Policy Development

Debt Action Forum What happens now? Initiatives that don’t need legislation Work with lending banks to ensure basic banking facilities for debtors SG colleagues liaising with UK Government and other stakeholders over lending and debt collection practices SG colleagues, SLAB and Advice Sector looking further into advice provision

Primary legislation – Bankruptcy (Scotland) Act 1985 –A slot in the Parliament timetable –A Committee will look for evidence Subordinate Legislation changes - Exempting any essential vehicle valued at £3,000 or less from vesting Sharon Bell Head of Policy Development Debt Action Forum What happens now?

Consultation to be issued shortly: In recognition of the Government’s commitment to exempt the main dwelling house from land attachment Pick up on the report of the Debt Action Forum to consider what changes, if any, might be appropriate to the way in which the family home is treated in bankruptcy Consider the treatment of ‘unofficial’ tenants Whether AiB should have some form of advice giving role. This could allow AiB to offer a view on the appropriateness of a particular course of action and recommend full engagement with money advice Whether the voting rights for creditors in trust deeds should be amended to limit the ability of a minority of creditors to prevent the protection of a trust deed Sharon Bell Head of Policy Development Debt Action Forum What happens now?

Sharon Bell Head of Policy Development Corporate Insolvency

What we have done so far – Insolvency Amendment Rules Limited Liability Partnership Regulations Corporate Insolvency website – including forms Sharon Bell Head of Policy Development

What we are going to do next - New stand alone Insolvency Rules Modernisation programme Insolvency Procedures for SCIOs Liquidator of last resort Sharon Bell Head of Policy Development Corporate Insolvency

Sharon Bell Head of Policy Development Policy Development The Future?

Engaging with change Legislative process Input to consultations Focus Groups and feedback from stakeholders Where are the gaps in the current debt solutions? Reviewing other Countries solutions – sharing best practice Sharon Bell Head of Policy Development

The Policy Cycle Sharon Bell Head of Policy Development

Question & Answer Gillian Thompson Rosemary Winter-Scott David Wallace John Cook Sharon Bell AiB Panel

Thank you