Media Questions > Personal

Response:

For people resident in England , one year bankruptcies were introduced on 1 April 2004 . However in Scotland , sequestration, the Scottish word for bankruptcy, lasts for three years. However, there is a provision in the Bankruptcy ( Scotland ) Act 1985 that sequestration may be extended for periods of two years at a time, and the proceeds can end sooner if there are sufficient assets to pay all creditor claims.

Response:

If you are sequestrated (the Scottish term for bankruptcy), your interest in the property will automatically pass to the trustee who is appointed to process your sequestration. However, the trustee does not immediately take steps to sell the property, there are a number of issues which must be considered:

If the property is subject to a mortgage and the bank or building society who provided the mortgage has started repossession proceedings, the trustee is unable to stop the proceedings. If a surplus arises following repossession and sale of the property, the bank/building society will account to the trustee for your share of the equity.

Equity means that the house value, as assessed by an independent valuer, is more than you owe on your mortgage. Several options can arise: (a) after having obtained consent from the occupant who is not subject to sequestration, the property can be placed on the open market for sale; (b) your spouse may be in a position to purchase your share of the equity; (c) a friend or family member may be in a position to purchase your share of the equity. If none of these options are available, the trustee can apply to the sheriff for authority to sell the property. This can include an action to evict all occupants if necessary. Sometimes the sheriff may grant the application and delay its effect for up to 12 months so that the family has time to find somewhere else to live.

The sheriff might refuse the trustee's application to sell the house. This might be because children are at a crucial stage in their education or because of ill health or disability of someone who lives there.

Even if the sheriff refuses the trustee's application to sell, it does not affect the ownership rights.

It should also be noted that if there is an endowment policy assigned to the bank or building society in respect of the mortgage borrowings, your interest in the endowment policy will transfer to your trustee. This means that when the property is sold the policy will be surrendered and the proceeds used to satisfy or reduce the outstanding mortgage. If the policy is not assigned, it becomes the property of the trustee who may sell or surrender it as appropriate.

This is a complex issue and every case is dealt with on its individual merits. The accountant in bankruptcy has published a brochure, AB13, Debtor: What happens to my home? which is available from the accountant in bankruptcy's office or on-line. You may also wish to seek legal advice on this matter.

Response:

The trustee does not as a matter of course, instruct an agent to visit your property to see what house contents you have. You do however have a duty to inform your trustee of any luxury or non-essential items.

The list of items which are exempt from vesting in your trustee is quite exhaustive and includes beds, tables, settees, carpets, fridge, microwaves, televisions, telephones, computers. Additional items which are exempt from vesting are tools of the trade, books and other equipment required for trade or business not exceeding a value of £1,000, any vehicle not exceeding £1,000 in value, a mobile home which is the debtor's principal residence or any tools or other equipment reasonably required for keeping a garden yard associated with the principal residence in good order.

Response:

If you accept that the debt is due and you cannot afford to pay the debt, there is no need for you to go to court. Sequestration will be awarded in your absence. However, should you dispute the debt or have means of settling the debt in full, either you or your legal representative must attend the hearing at the Court of Session to avoid sequestration being awarded.

Response:

Sequestration is advertised in a publication called The Edinburgh Gazette. This is an official publication which members of the public do not usually read. It is usually read by accountants, bankers, solicitors etc. Notice of a sequestration is not advertised in a local newspaper unless the trustee cannot locate you e.g. because you do not respond to his letters, and requires to advertise so that creditors can notify their interest and provide information about you.

Your employer would not have to be notified unless your contract of employment states that you must tell the employer should you be subject to formal insolvency proceedings.

Response:

A wage arrestment is a type of diligence and before undertaking diligence against a debtor, the creditor must prove that the debt is owing and overdue. There are three ways to do this:

Once the creditor has proved that the debt is owing and overdue, he is free to progress the diligence i.e. the earnings arrestment.

The creditor advises your employer of the arrestment but is not entitled to take all of your salary. The Debtor ( Scotland ) Act 1986 has tables which provides details of how much can be arrested depending on the amount of money your earn, hourly, daily, weekly or monthly. If the arrestment is successful, the money will be deducted from your salary by your employer and sent to the creditor. You will receive the net salary. The deductions will continue until the debt is paid in full, you move employer or you are sequestrated.

Response:

The level of contribution is agreed with your trustee and each case will be treated on its merits. If a man is single and living with his parents, he is clearly in a position to pay more than a man of similar age and income if the second individual has a mortgage and three children to support.

Response:

If you are sequestrated, all of your debts - credit cards, loans, store cards, catalogues, outstanding business accounts, together with monies due to the Inland Revenue and any other government body will be included in the process.

Response:

Your employer does not have to be notified by you unless your contract of employment states that you must tell your employer should you be subject to formal insolvency proceedings.

Response:

Once you are formally insolvent i.e. made bankrupt or sign a trust deed, the insolvency practitioner will provide the forms to former employees in order that they may claim unpaid entitlements from the Redundancy Payments Office of the Department of Trade & Industry, Edinburgh. Claims can be submitted for the following:

• Wages or salary for non-payment for up to 8 weeks.

There is an upper limit on the amount paid by the Redundancy Payments Office, which is currently £280 per week.

Response:

Broadly speaking: yes.   However, a trust deed tends to be more flexible at the outset in terms of being able to commence the process.   Like sequestration, a typical trust deed runs for 3 years and will include any assets that you own.   A trust deed tends to require you to pay a monthly contribution to your trustee in order to give your creditors a reasonable prospect of a dividend, either during or at the end of the trust deed period.

Response:

The position may depend upon what you advised the credit card companies when you separated.   For example, if you wrote to them to cancel the cards and/or your liability subsequent to date of separation, you might be able to argue that you are not liable.   In reality, few people do this and the result tends to be joint and several liability as of today's date.   Thus, if you have financial resources and your former husband does not, the credit card companies will pursue you for the full amount.

Response:

Unlike sequestration or trust deed (which are debt relief procedures), the Debt Arrangement Scheme "DAS" is a debt management process which anticipates as long a repayment period as necessary to pay your creditors, based on your ability to pay from your weekly/monthly earnings.   The repayment period is flexible and is likely to be between 5 and 10 years in length and it may be possible to negotiate an agreement to pay less than the full liability.

Under a DAS, your home is exempt from the process and if you have substantial equity in your home, creditors may not agree to a DAS proposal.

Response:

Generally, the following bodies provide free advice on dealing with debt:

• Aberdeen/Aberdeenshire/Moray Council
• Local Citizens Advice Bureaux
• Local Money Advice Centres.  

You should check your telephone directory for contact details and names of any other free debt advisers.

You can also contact a local insolvency practitioner and certain solicitors but you may be charged for any advice given.   Meston Reid & Co do not charge for an initial meeting.

Response:

Your trustee will obtain an independent valuation of the vehicle.   If the vehicle is valued at less than £1,000, it will probably be excluded from the sequestration process but if it is worth more than £1,000, you may be able to retain it as long as you pay a reasonable contribution to the sequestration.   In order to retain it, a friend or family member could buy the car from the trustee and allow you to continue to use it.

Response:

Once you are formally insolvent i.e. made bankrupt or sign a trust deed, the insolvency practitioner will provide the forms to former employees in order that they may claim unpaid entitlements from the Redundancy Payments Office of the Department of Trade & Industry, Edinburgh.   Claims can be submitted for the following:

There is an upper limit on the amount paid by the Redundancy Payments Office, which is currently £280 per week.

You can operate a bank, building society or post office account whilst you are sequestrated or subject to a trust deed as long as the financial institution wishes to continue a banking relationship with you.   It is unlikely that an overdraft facility will be provided and thus, careful budgeting is required.

If you are sequestrated or subject to a trust deed, student loan monies advanced prior to the date of sequestration/signing of the trust deed become a claim in the insolvency.   The debt would be dealt with by the trustee and you will not have to repay it directly - your trustee will sell your assets and obtain a contribution form you during the three year period of insolvency in order to generate funds to deal with all of your liabilities.

Yes, a debtor is discharged of all debts and obligations due at date of sequestration, excluding the following:

(a) Fines and penalties due to the crown or fines imposed in a district court.

(b)   Any liability under a compensation order in terms of section 249 of the Criminal Procedure ( Scotland ) Act 1985.

(c)   Any liabilities incurred by reason of fraud or breach of trust.

(d)   Deposited funds regarding the Bail ( Scotland ) Act 1980.

(e)   Any obligation regarding aliment or a periodical allowance payable on divorce by virtue of a court order or under an obligation.

(f)   A fine imposed due to an offence committed under the terms of the Bankruptcy ( Scotland ) ct 1985.

(g)   Student loans which you have received, or which become payable after the date of sequestration.

(h)   Debts arising from fraud and social funds loans, or overpayment of benefits.

When your mother was made bankrupt, all of her assets were transferred to the trustee. As part of the process, the trustee would have recorded his interest in any life assurance policies which your mother held. As the insurance policy constituted an asset at the date of sequestration the policy proceeds revert to the trustee for the benefit of the general body of creditors.

No, but you may be responsible for any company debts for which you provided a personal guarantee. Personal guarantees are often provided in respect of bank borrowings, and finance arrangements for vehicles or large items of plant and machinery.

You do not have a statutory obligation to attend the meeting of creditors. However, should creditors attend the meeting, they may have various questions regarding the financial and trading history of your business and thus it would be helpful for the trustee and for creditors if you did attend the meeting.

The accountant in bankruptcy is a person appointed by the Scottish Executive. The present accountant in bankruptcy is Mrs Gillian Thomson and she has a number of staff to discharge her duties, which cover the whole of Scotland . The accountant's statutory functions are as follows:

(a)   maintaining the register of personal insolvencies.

(b)   supervising the performance of interim and permanent trustees in the exercise of the their statutory duties.

(c)   exercising the functions of commissioners in all sequestrations.

(d)   acting as interim trustee in sequestrations where an interim trustee is not nominated and as permanent trustee where there is no election of a permanent trustee.

(e)   registration of documents required to be filed by receivers and liquidators.

Section 7(2) of the Criminal Injuries Compensation Act 1985 provides that an award made under the criminal injuries compensation scheme to a debtor shall not vest in the permanent trustee. This came into effect on 1 April 1996 .

Awards resulting from claims made before 1 April 1996 are not covered by the scheme and thus the money would vest in the trustee unless the debtor applied to the sheriff for an order exempting the award from vesting in the trustee. Thus, the date of claim is an important consideration.

However, notwithstanding the new scheme rules which indicate that the monies would vest in the debtor, it is open for a trustee to seek a contribution from the monies as provided for in the Bankruptcy ( Scotland ) Act 1985.

Response:

If the funds are held in a trust account i.e. one designated "C Wright in trust for B Wright" or "C Wright for B Wright", as opposed to general savings account in your name, then the funds will not be claimed by your trustee.  However, if the monies are in a non-specific account, it is likely tha they will be lost.

The debt has arisen as a result of illegal purchases and although such debtrs are not stated as being exempt from ranking in a sequestration, it is likely that your trustee may be unwilling to accept such a debt in a sequestration process.  Whilst the unpaid dealers will not pursue you through court they may rely upon other means of collection for which the civil process of sequestration will not protect you.

If your employer is subject to formal insolvency proceedings i.e. made bankrupt (sequestrated) or signs a trust deed, the trustee will provide relevant forms to all former employees in order that they may claim unpaid entitlements from the redundancy payments office, Edinburgh .    Claims can be submitted for the following:

•  Wages or salary for up to 8 weeks of non payment

•  Statutory payment(s) for time off work; or suspension on medical or maternity grounds

•  Holiday pay for up to 6 weeks

•  Notice pay i.e for not being given proper notice

•  Redundancy

•  Employer's unpaid contributions to a pension scheme

The current upper weekly limit on the amount paid by the redundancy payments office is £290.   The limit applies to each of the above payments.   Your local CAB or Industrial Tribunal office can provide full details.   

Commissioners are a representative body of creditors of the sequestrated estate.   They are elected by all creditors to advise and assist the trustee in his management of the sequestrated estate.    They have no power to deal directly with or transact with the sequestrated estate and they are not allowed to purchase any of the sequestrated estate assets.    General functions of the commissioners include review of the trustee's intromissions and approval of his fees.   

The trustee will consult with the commissioners and have regard to any advice offered by them regarding the recovery, management and realisation of the sequestrated estate.