Meet The Accountant

Meet The AccountantPersonal and Corporate

Insolvency in Scotland

Case OperationsUpdate

Case Operations Update

• General Statistical Update • Debtor Applications for Bankruptcy• AiB In-house Management Update

John Cook Head of Case Operations

General Statistical Update


Total

07/08

Total

08/09

YTD

09/10

Projected

09/10

Bankruptcy Awards

6158 14777 6274 15058

Protected Trust Deeds

7509 7633 4196 10070

DAS

DPPs

442 908 496 1190

Corporate Insolvencies

1069 971 366 878

Awards By Type

Total

07/08

Total

08/09

Projected

09/10

Debtor Application

2511

41%

11421

77%

12113

80%

Creditor

Petition

3235

52%

2914

20%

2568

17.5%

Trustee

Petition

412

7%

442

3%

377

2.5%


Debtor Bankruptcy Applications

• Regulations commenced April 2008• LILA Route• Checking Procedure• Ongoing Administration


Debtor ApplicationsStatistics

Total

08/09

YTD

09/10

Projected

09/10

Net Applications 12192 5076 12182

LILA Awards 9417 3949 9478

A.I Awards 2004 1098 2635

Rejections 383 255 612

Cases Converted 797 223 535


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


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”


‘Serving the People of Scotland’

• In January we supported the Debt Action Forum

- provided secretariat support

- provided reports and background information

• AiB 2009-2010 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



DiligenceBankruptcy 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


• 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


• 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


• 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


• 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


Bankruptcy:

DAS

LILA route

Protected Trust Deeds

Debt Action Forum


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


Number of approved DAS Debt Payment Programmes

1

128108

444

908

398

0

100

200

300

400

500

600

700

800

900

1000

2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 (ytd : Apr-Jul)

DAS Number of Approved DPPs


DAS Approved Money Advisers

There are currently 104 approved money advisers in Scotland.

60% of approved money advisers submitted DPPs during the last year.


DAS Value of Debts in the DPPS

340

140

3714

4 10

50

100

150

200

250

300

350

400

Under £25K £25K-£50K £50K-£75K £75K-£100K £100-£125K £125K+

Value of Debt

No

of

peo

ple

in

th

e d

eb

t ra

ng

e

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.


DAS Length of DPPS

0

50

100

150

200

250

300

1-5 years 5-10 years 10-15 years 15-20 years 20-30 years 30+ years


DAS Consultation

• Access to DAS

• Administration

• Consent Rules & Fair and Reasonableness

• Debt Payment Programmes

• Single Debts

• Payment Distribution


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


LILA Bankruptcies Value of Debt

Distribution of total debts in LILA cases

0

100

200

300

400

500

600

number of LILA Cases


On average, debtors owe £17,288

LILA Bankruptcies Top 10 Creditors

0

100

200

300

400

500

600

700

800

900

1000

S eries 1


Bankruptcies Future?

• Unlikely to change the Debtor Application Fee for 2010-11

• Unlikely to change the LILA criteria

• Debt Action Forum report and SG response


Protected Trust DeedsSome 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


PTD Main CreditorsTop 10 Creditors by Debt Owed (plus credit union figure)

10.1%

6.5%

4.8%

3.8%

3.0%

2.5%2.1%

1.9%

0.2%

3.6%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

HBOS RBS Lloyds TSB BarclaysBank

MBNA Capital One NorthernRock

ClydesdaleBank

HMRC All CreditUnions

Pe

rce

nta

ge

of

tota

l d

eb

t o

we

d t

o c

red

ito

rs


PTD Debtor Income Profile

Monthly Income of Debtors

0

50

100

150

200

250

300

Up

to £

200

£200

.01

to £

400

£400

.01

to £

600

£600

.01

to £

800

£800

.01

to £

1000

£100

0.01

to £

1200

£120

0.01

to £

1400

£140

0.01

to £

1600

£160

0.01

to £

1800

£180

0.01

to £

2000

£200

0.01

to £

2200

£220

0.01

to £

2400

£240

0.01

to £

2600

£260

0.01

to £

2800

£280

0.01

to £

3000

£300

0.01

to £

3200

£320

0.01

to £

3400

£340

0.01

to £

3600

£360

0.01

to £

3800

£380

0.01

to £

4000

£400

0.01

to £

4200

£420

0.01

to £

4400

£440

0.01

to £

4600

Monthly Income Range

Nu

mb

er o

f D

ebto

rs


PTD IP FeesTrustee Fees

0 113

123

279

413

112

21 13 112

36

238

0

50

100

150

200

250

300

350

400

450

CreditorFee

£0 to£1000

£1000.01to £2000

£2000.01to £3000

£3000.01to £4000

£4000.01to £5000

£5000.01to £6000

£6000.01to £7000

£7000.01to £8000

£8000.01to £9000

£9000.01to £10000

£10000.01to £20000

Greaterthan

£20000

Nu

mb

er

of

Tru

ste

e F

ees

Total Number of Trust Deeds = 1262


• 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


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


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


Debt Action Forum


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


• 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


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


• 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


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


Debt Action ForumWhat 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



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




Corporate Insolvency


What we have done so far –

• Insolvency Amendment Rules• Limited Liability Partnership Regulations• Corporate Insolvency website – including forms


What we are going to do next -

• New stand alone Insolvency Rules• Modernisation programme• Insolvency Procedures for SCIOs• Liquidator of last resort




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


The Policy Cycle


Question & Answer

Gillian Thompson

Rosemary Winter-Scott

David Wallace

John Cook

Sharon Bell

AiB Panel

Thank you

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