ICAS calls for a clear policy decision on the direction of travel for debt solutions in Scotland
ICAS has called for the Scottish Government to make a clear policy decision on whether debtors are to be forced into particular solutions or whether there is to remain a choice of solutions available to meet the individual circumstances and preferences of individuals. Steven Wood reports on the recommendations made.
In January, the Scottish Government and its executive agency, the Accountant in Bankruptcy (AiB), issued a consultation on proposals to change protected trust deeds (PTDs).
Responding to the consultation, ICAS agree that individuals should be directed to appropriate debt solutions. However, point out that what is an appropriate debt solution will depend upon several factors and on individual circumstances and that solution should balance the needs of a debtor and the rights of the creditors.
Concerns are raised within the response that the proposals surrounding refusal of protection where the full debt in a trust deed could be repaid in 60 months or where the value of contributions over its extended period is equal to or greater than the level of debt, take an overly simplistic approach.
A call is made for a clear policy decision to be taken on whether the direction of travel for debt solutions in Scotland is to be down a route where debtors (and to some extent creditors) are forced into particular solutions or whether there is a choice of solutions available to meet the individual circumstances and preferences of individuals. ICAS support retaining a choice of solutions being available.
A significant flaw in the proposals that all category one and two disbursements should form part of the office holder’s fixed fee is highlighted by ICAS. The consultation appears to fundamentally misunderstand the scope of these disbursements which relate only to payments on behalf of an insolvent estate which are met firstly by the office holder before repayment from the insolvent estate.
It is highly unlikely that the intention of the proposed change is to be limited to costs which are firstly met by the office holder before repayment from the insolvent estate. Firms could easily negate the impact of such a change by paying costs directly from funds ingathered into the estate when available.
ICAS urges the AiB to make more use of existing legislative provisions and keep under review the effectiveness of non-legislative measures which are currently being undertaken. Only in the event that these measures do not prove effective, should further legislative provision be considered.
While there is no objection in principle to the restructure of the voting system in PTDs so that a trust deed would only be protected if 75 % in value of voting creditors actively accept, there is caution that this change may not have the impact intended by the proposal.
ICAS also agreed with the consultation proposal that no general power should be granted to the AiB to allow refusal of protection. ICAS do not consider that there is a case for state intervention in a contractual arrangement between an individual, their creditors and a trustee.
Finally ICAS, once again highlight concerns that the issues regarding a debtor’s heritable property, and particularly a debtor’s dwelling-home, remain largely unanswered. ICAS reiterates its call made on numerous occasions previously for the Scottish Government to instigate a full review of how a debtor’s heritable property, and in particular equity, should be dealt with across all debt payment and debt relief solutions.
The Scottish Government consultation closed on 19 April 2019. It is disappointing to note that the AiB’s ‘Report and Summary of Reponses’ in relation to the ‘Building a Better Debt Arrangement Scheme’ consultation was issued only late on that day preventing respondents to the PTD consultation to take this information into account and reducing the piecemeal effect of legislative development.