Bankruptcy and Diligence (Scotland) Bill: business and regulatory impact assessment

Summary and Recommendation

Summary of costs and benefits

77. The impacts, including costs, of this Bill on business and regulatory bodies are minimal as set out below:

Option 1 – Do nothing

78. Do nothing and retain the status quo, with the effect that current practice and procedure for affected parties will not require amendment.

79. This option would maintain the status quo for bankruptcy and diligence and there would be no power to bring forward secondary legislation to create a mental health moratorium. This option also leaves the current law in an unsatisfactory manner and prevents the opportunity to support those with a serious mental illness who have problem debt. This is undesirable.

Option 2 – Introduce the draft Bill

80. Progress the Bill which will include measures such as to:

• Introduce an enabling power which will allow for future regulations to create a mental health moratorium. The introduction of such a moratorium is seen as a positive step by stakeholders and professionals in the mental health sector.
• Make technical amendments to existing bankruptcy legislation to benefit all parties who require to read and interpret the legislation and understand how it operates. This will reduce the likelihood of inconsistencies in interpretation of the existing legislation and have no cost implications.
• Introduce new notification requirements in respect of arrestment and action of furthcoming and diligence against earnings to provide creditors with additional information to decide how best (or whether) to pursue monies owed.
• Provide debtors with a DAIP prior to the relevant court hearing stage in respect of diligence on the dependence to encourage a higher number of debtors to seek help and advice with problem debt.
• Extend the redemption period in exceptional attachment for items not removed immediately from the dwellinghouse (but removed at a later date prior to auction) to allow debtors extra time to pay the redemption fee.
• Streamline the current money attachment procedure to make the process of executing this diligence more convenient for creditors. This will also provide a saving for creditors as they will no longer face extra court costs if they seek permission from the Sheriff to enforce the attachment out with the prescribed hours.

81. This option contains an enabling power to bring forward secondary legislation to introduce a mental health moratorium so in itself has no immediate impact on the sectors and groups. The regulations made using this enabling power would require to be accompanied by a BRIA and it would be at that point that the impacts would be measured and set out.

82. There will be costs to employers and arrestees to complete returns confirming where an arrestment has been unsuccessful, however these costs are considered to be minimal.

83. A financial penalty will only impact on those employers who, without reasonable excuse, fail to provide the required information. There would be a cost for a creditor in making an application to the court for such an order where they do not receive the required information. It is not possible to quantify this.

84. Additional costs for publishing and distribution of the DAIP will be incurred by AiB who are already responsible for the costs of printing and distributing.

85. There may be a small additional cost for the creditor in providing the debtor with a DAIP – and the level of that cost will depend on how that is done – but this cost can be added to the debt, and is therefore recoverable from the debtor.

Recommendation

86. Following an analysis of the costs and benefits of each option, it is recommended that option 1 be dismissed, and option 2 be adopted.