Bankruptcy Law Reform Claire Orr Executive Director of Policy & Compliance

Claire Orr | AiB | Dec 2012 What is our world like now? Consumer debt Debt management firms Business closuresRecession threats New forms of communication & advertisement Credit cards

Claire Orr | AiB | Dec 2012 Developing a Vision for the 21 st Century A “Financial Health Service” for debt advice, debt management and debt relief which: Ensures access to fair and just processes of debt relief and debt management Supports the principle that those debtors who can pay should pay their debts Acknowledges the wide range of circumstances and events that contribute towards bankruptcy for individuals and businesses Secures the best return for creditors – ensuring that the rights and needs of those in debt are balanced with the needs of creditors and businesses

Claire Orr | AiB | Dec 2012 A “Financial Health Service” continued A focus on individual responsibilities - with a greater emphasis on: –debtors through an agreement/contract between debtors and the deliverers –creditors in terms of responsible lending, active engagement and more differentiation of individuals credit rating –Insolvency Practitioners in terms of seeking to help stamp out bad practice from debt management companies –AiB to effectively regulate the service and ensure fair and effective delivery Debtors provided with appropriate advice and aware of the range of options An education role – seeking to impact on the culture and behaviours of individuals and prevent repeated financial issues

Claire Orr | AiB | Dec 2012 Bankruptcy Law Reform Consultation Key Principles within the consultation: A range of new solutions/products for debt relief and debt management Ensuring debtors make a fair contribution Integrating debt advice and education A review of the court processes and preventing debtors abusing the system Closed on 18 th May responses including 89 organisations Summary of responses published cy-law-reform-consultation-summary-responses

Claire Orr | AiB | Dec 2012 Government response Published 1 November Sets out provisions to be included in a Bankruptcy Bill Further provisions by Regulation Stronger Guidance

Claire Orr | AiB | Dec 2012 Bankruptcy Bill Compulsory advice from approved money adviser before statutory solution a single Scottish-specific Common Financial Tool which applies to bankruptcy, PTDs and DAS Provision for contributions to be deducted from wages Standard minimum contribution period - 48 months - in DAS, PTDs and bankruptcy

Claire Orr | AiB | Dec 2012 Bankruptcy Bill cont. Financial education as an integral part of Scottish statutory debt relief processes – certain criteria 6 week moratorium period across all statutory solutions Simplifying Apparent Insolvency criteria and increase the minimum debt level to £3,000 A ‘No Income’ product for individuals on state benefits, who have been assessed as unable to make a contribution

Claire Orr | AiB | Dec 2012 Bankruptcy Bill cont. Creditor petitions to AiB where not contested Debtor co-operation linked to discharge and discharge delayed indefinitely where debtor cannot be traced Exclusion of certain debt incurred within 12 weeks of bankruptcy Creditor claims must be within 120 days of notice Electronic sederunt book

Claire Orr | AiB | Dec 2012 Bankruptcy Bill cont. Clarification of recall process to ensure distribution of funds Removal of composition and consideration of commissioners’ role Provision for payment holidays where income shock experienced – discharge delayed accordingly Administrative decisions made by AiB instead of sheriff Sheriff retains appeals and decisions concerning family home

Claire Orr | AiB | Dec 2012 Regulations RoI to be moved from Act of Sederunt to Bankruptcy (Scotland) Regulations DAS Regulations to introduce review process for decisions of DAS Administrator, composition to be developed DAS type solution for sole traders and small business partnerships, linked to advice from IPs or Business Gateway PTD Regulations to introduce minimum debt level, minimum dividend and standard front sheet Removal of need to publish trust deeds in Edinburgh Gazette with new requirement to publish on RoI. Form 4s to be provided to creditors annually

Claire Orr | AiB | Dec 2012 Stronger Guidance More proactive supervision by AiB including greater use of powers of direction PTD guidance to be introduced to encourage best practice Includes revised structure for trustee fees consisting of up-front fee and percentage fee based on funds ingathered

Claire Orr | AiB | Dec 2012 Benefits Realisation Securing the best return for creditors – ensuring that the rights and needs of those in debt are balanced with the needs of creditors and businesses A focus on debtor responsibilities – so that those who can pay do pay a contribution A minimum dividend in relation to PTDs A longer minimum period (4 years) of contributions across all products A more consistent and transparent approach to assessing a debtor’s surplus income Debtors accessing a product which is fairer to them and to their creditors - removal of any “perverse incentives”

Claire Orr | AiB | Dec 2012 Next Steps Autumn 2012 Ongoing stakeholder discussion Specific engagement with creditors Drafting of legislation and Regulations Before Summer recess 2013 Bill introduced to Parliament Following Royal Assent, Consolidation Bill introduced 2013 – 2014 Preparing for the change Development of a case management system that delivers a digital public service - will provide greater creditor interaction (as in DASH)

Claire Orr Executive Director of Policy & Compliance T: E: