Accountant in bankruptcy recognises wider obligations as a trustee: FOI release

Information requested

By what means and in what manner does the AIB communicate to its staff and relevant Providers:
 

1. That an award of sequestration is only a finding of “apparent insolvency”.

2. That in addition to every sequestrated estate being held by the AIB in trust for the proven creditors ,the debtor is also to be recognised as a contingent beneficiary:

• in regards to heritable property that could be abandoned in favour of (rather than sold to) the debtor, and
• in the case of such part of a solvent estate as exceeds the amount required to meet expenses and the creditor claims ‘the debtor’s surplus’.

3. With regard to solvent estates - by what criteria and at what stage in the sequestration process should a trustee formally accept that a debtor has become a co-beneficiary and not a contingent one?

4. The revised procedures to be adopted when co-beneficiaries are so identified.

5. That the trusteeship responsibilities in relation to the debtor’s surplus are governed by the application of general trust law.

 

Response

The administration of a bankruptcy is governed by the Bankruptcy (Scotland) Act 2016, the Bankruptcy (Scotland) Regulations 2016 (The Act), the Bankruptcy (Scotland) Regulations 2016 and the Bankruptcy (Applications and Decisions) Regulations 2016. AiB also issue guidance to trustee's in bankruptcy based on The Accountant's interpretation of bankruptcy legislation and
how they expect a trustee to administer a case. These can on our website at Accountant in Bankruptcy - Notes for Guidance - Trustee - October 22 | Accountant in Bankruptcy (aib.gov.uk) (Notes for Guidance) and it contains links to the aforementioned legislation. AiB staff and Providers follow similar guidance and processes.

1. No guidance has been issued as ‘apparent Insolvency’ is defined in the section 16 of the Act as:

• (1) The apparent insolvency of a debtor is constituted, or where the debtor is already apparently
  insolvent again constituted, whenever— (a) the debtor’s estate is sequestrated,

2.  a) in regards to heritable property that could be abandoned in favour of (rather than sold to) the debtor, and b) in the case of such part of a solvent estate as exceeds the amount required to meet expenses and the creditor claims ‘the debtor’s surplus’.

No specific guidance is issued in respect of the debtor being a "contingent beneficiary", each case is assessed on the circumstances relevant to an individual case.

It is a function of a trustee to recover, manage and realise the estate of the debtor, whether situated in Scotland or elsewhere, in accordance with section 50(1) of the Act. Guidance relating to heritage can be found in section 10.2 of the Notes for Guidance. The process would be the same whether an estate is solvent or insolvent.

3. Again no specific guidance is issued regarding this matter Guidance in the management and realisation of an estate in contained within section 10 of the Notes for Guidance and cases are managed the same whether an estate is solvent or insolvent.

4. See the answer to question 3.

5. The responsibility to pay surplus funds to a debtor is carried out in accordance with section 129(6) of the Act, "any surplus remaining after all the debts mentioned in this section have been paid in full must be made over to the debtor or the debtor's successors or assignees".

The Act does recognise the debtor's rights to take action as follows:

• their right under section 50(7) to make an application to the sheriff if dissatisfied with any act, omission or decision of the trustee;
• their right to request a review, or subsequent appeal, against the acceptance or decision made about a claim by the trustee, under section 127(1) and 127(5), if the debtor can satisfy section 127(2) or 127(6) that they would have, or are likely to have a pecuniary interest in the outcome of the review/appeal, ie that a reversion would be paid to them if the amounts were reduced;
• their right to appeal a determination of the trustee's outlays and remuneration under section 134(1) or 136(4), if the debtor can satisfy sections 134(4) or 136(7) that they have, or are likely to have, a pecuniary interest in the outcome of the appeal, ie that a reversion would be paid to them if the amounts determined were reduced;

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