This item was published during the term of a previous administration that ended in April 2007
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Bankruptcy proposals
18/11/2003
Proposals for new legislation to modernise and improve the bankruptcy system in Scotland have been published for consultation.
Enterprise Minister Jim Wallace unveiled 'Personal Bankruptcy in Scotland: A Modern Approach' which will form the basis for a new bill to amend existing legislation. The consultation period for these proposals ends on 20 February 2004.
Personal bankruptcy is the most extreme form of debt resolution, with serious legal consequences for the debtor. At present, in addition to having their assets transferred to a trustee to be distributed amongst their creditors, bankrupts are also subject to certain disqualifications for a three year period. These include restrictions on borrowing, not being permitted to form a limited company, and not being authorised to serve on certain public bodies.
The proposed changes aim to reduce the stigma of bankruptcy and encourage responsible risk-taking, whilst providing an effective regime to protect the public and business community from the small minority of bankrupts who have acted in a fraudulent manner.
Included in the consultation paper is:
A reduction of the bankruptcy period from three years to one year.
New bankruptcy restriction orders for those bankrupts who do not co-operate with their trustee or are suspected of potentially fraudulent action.
Encouraging people to seek debt advice early to avoid the serious consequences of bankruptcy.
Streamlined bankruptcy proceedings with reduced court involvement to improve bankruptcy systems.
Mr Wallace said:
"As I have stressed many times before, economic growth is top of our agenda. I want to see a culture of aspiration in Scotland where people are less afraid of taking risks.
"Changing the bankruptcy laws is one way in which we can achieve this, through reducing the stigma of bankruptcy and encouraging responsible risk-taking.
"It is important that we have a modern, flexible bankruptcy system that meets the needs of Scotland in the 21 st century. We aim to develop and refine the existing bankruptcy laws, taking account of the needs of Scotland's debtors, creditors and small businesses.
"Creditors, many of whom are small businesses, need to be confident that there are adequate systems in place to protect their interests and facilitate debt recovery.
"The one year bankruptcy period would be accompanied by appropriate safeguards to protect the public and businesses as well as provision for ongoing payments to creditors.
"It is also important that people are reassured that if they suffer from unexpected hardship and severe debt problems, there are humane solutions to help them move forward with their lives."
Speaking about the proposed new one year bankruptcy period for all bankrupts, Mr Wallace went on:
"Reducing the bankruptcy period from three years to one year is one of the key ways in which we propose to reform existing legislation.
"This change would ensure consistency with England and Wales, and will help ensure a level playing field for businesses throughout the UK.
"We hope to encourage small business bankrupts to set aside past experiences and move forward with an entrepreneurial spirit."