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Changes to Scottish Bankruptcy law

Changes to Scottish Bankruptcy law

The bankruptcy process applies to individuals living in England, Wales or Northern Ireland. There is a separate bankruptcy process sometimes known as sequestration in Scotland. Bankruptcy is a form of insolvency and is normally suitable for those who are unable to pay back their debts in a reasonable time. Most applications for bankruptcy are made by the individuals in debt, but it is also possible for a person to be made bankrupt. 

A new Scottish Bill is currently making its way through the Scottish Parliament and will make the following changes to the Scottish bankruptcy laws:

  • Give powers to the Scottish Ministers to establish a pause on debt recovery action against people who are in debt and who also have a mental illness.
  • Make technical changes to the law on bankruptcy.
  • Update the law on diligence. Diligence is the legal processes that creditors can take to enforce repayment of overdue debts.

These changes are part of a wide-ranging policy review of Scotland’s statutory debt solutions, specifically moratorium protection, bankruptcy, Protected Trust Deeds (PTDs) and the Debt Arrangement Scheme that was launched back in 2019. Part of the work was delayed as a result of the Coronavirus pandemic. The Bill aims to help and improve the lives of people who are struggling with problem debt and serious mental health issues.