Protected trust deeds: improving the process consultation

Part 4: Debt Action Forum

4. As part of the Scottish Government's ongoing commitment to help the people of Scotland obtain debt relief, in 2009, the then Minister for Community Safety, Fergus Ewing, invited representatives of stakeholder groups to join him in a Debt Action Forum ( DAF).

4.1 The Forum considered various options currently available to address debt problems; including PTDs. They considered that there may be scope to encourage more use of PTDs as a route for debtors who can pay back some of what they owe. The DAF recognised that, if significant changes were to be made to the PTD process, further consultation would be required. A copy of the DAF final report can be viewed on the AiB website at www.AiB.gov.uk.

4.2 The Scottish Government issued the following response to the DAF final report in respect of trust deeds:

" The Scottish Government appreciates there are some issues which must be considered by a wider cross section of interested parties. We acknowledge the importance of building consensus on important and far reaching issues which impact on individuals and businesses in Scotland. We must ensure our debt solutions provide protection from abuse by the unscrupulous yet offer fairness where needed. We must ensure that those who can meet their commitments continue to do so and most importantly we must ensure that people who are struggling to deal with unmanageable debt are protected against the threat of unnecessary homelessness."

4.3 To help protect debtors against unnecessary homelessness the Home Owner and Debtor Protection (Scotland) Act 2010 was developed from recommendations made by DAF. This Act, although giving added protections to the home for debtors in bankruptcy and PTDs, does not address the fundamental issues surrounding the treatment of the home in these debt solutions.

4.4 The treatment of the debtor's home had been discussed at DAF in relation to PTDs and Bankruptcy, also taking into account the new diligence of land attachment. Land attachment was introduced by the BAD Act to replace the outdated diligence of Adjudication for Debt, however this has not yet been commenced. This is because land attachment is controversial, being welcomed by some, but seen by others as a diligence that can make people homeless for very small debts (currently proposed at £3,000). This has been a very contentious issue, especially with the money advice sector who regard the threat of homelessness, particularly for such small debts, as disproportionate.

4.5 It had been intended that the Scottish Government would consult on land attachment prior to its introduction, to ensure the right balance between the interests of debtors and creditors had been established. However, original plans to consult have been expanded to include the wider issues of the treatment of the home in PTDs and bankruptcy following the discussion at DAF, where a paper submitted by Professor George Gretton and John St Clair discussed potentially radical proposals for either the total or partial exclusion of a debtor's family home from bankruptcy and trust deeds as well as from land attachment.

4.6 Work has been, and is still, ongoing to progress consultation in this area.

4.7 At the DAF the Forum members also discussed the availability of on-line access to the Register of Insolvencies, and whether this service should be provided free of charge. Members also considered whether there was a requirement to maintain publication by the trustee of notices relating to PTDs in the Edinburgh Gazette.

4.8 ICAS suggested dropping the requirement on trustees to publish notices relating to PTDs in the Edinburgh Gazette also, otherwise this form of personal insolvency would be at a disadvantage.

4.9 The Scottish Government agreed to remove the requirement for trustees to advertise awards of bankruptcy in the Edinburgh Gazette and to allow interested parties free access to the Register of Insolvencies ( ROI). This has now been implemented, with free access to the Register introduced in April 2010 and the requirement for trustees to advertise bankruptcies in the Gazette removed for awards of bankruptcy made on or after 15 November 2010.

4.10 Since proposed at DAF, there has been an intention on the part of the Scottish Government to introduce legislation to remove the requirement that notices relating to trust deeds to be published in the Edinburgh Gazette and replace this with a requirement to put a notice in the ROI. Although a fee would be levied by the AiB for the work involved in publishing any notice relating to a trust deed, this would be at a reduced rate in comparison with the Gazette. It is also the intention to improve the service provided by the ROI by having it display information not currently available in the Gazette. This could include, for example, a standard front sheet containing details of the debt and prospective dividend which would assist creditors in their decision on whether to object to the trust deed. It could also include copies of the annual Form 4 provided by trustees, which would allow all interested parties to see how the trust deed is progressing and assist creditors in considering audit requests to AiB.