What are bankruptcy restrictions?
Bankruptcy Restrictions were introduced by legislation on 1 April 2008 and impose certain restrictions on a debtor where there has been a level of misconduct by the debtor either before or after the date of bankruptcy, as described in section 56B of the Bankruptcy (Scotland) 1985 Act and section 156 of the Bankruptcy (Scotland) Act 2016. The restrictions remain in force after the date of discharge for periods varying between two and 15 years, depending upon the severity of the misconduct.
Bankruptcy Restrictions were introduced for the purpose of deterring debtors from misbehaving or being dishonest before or during their bankruptcy and to provide businesses and creditors with a level of protection from such debtors once their bankruptcy had ended. A Bankruptcy Restriction Order can help ensure those who choose to abuse the bankruptcy process, either before or during their bankruptcy, face the consequences of their actions and this can include an appearance in front of a Sheriff if AiB deem the debtors behaviour has been exceptionally serious.
Only the Accountant in Bankruptcy or a sheriff can grant a Bankruptcy Restriction Order. However, all trustees of bankruptcies have a responsibility to report any suspected misconduct by a debtor to AiB for investigation.
If AiB believes there are sufficient grounds for making an application to a sheriff, the debtor will be informed and a court hearing may be assigned by the sheriff, or he may make a decision based on the evidence provided by AiB. Previously, a Bankruptcy Restrictions Undertaking could be granted by AiB. However, these only apply to cases awarded from 1 April 2008 to 31st March 2015 and no longer apply for cases awarded bankruptcy on or after 1 April 2015.
What restrictions can be applied in a BRO?
The restrictions which apply to a debtor when a Bankruptcy Restriction Order is granted are the same which apply to the debtor during their bankruptcy. These include:
- The debtor must disclose to a credit provider that they are subject to a Restriction Order if they, either alone or jointly with another person, wish to get credit of more than £2,000.
- The debtor must disclose to a credit provider that they are subject to a Restriction Order if they wish to get credit of any amount and already have debts of £1,000 or more.
- The debtor must disclose to those they wish to do business with the name (or trading style) under which they were made bankrupt.
- The debtor may not act as the director of a company or take part in its promotion, formation or management unless they get the court’s permission to do so.
- The debtor may not act as an Insolvency Practitioner, or as the Receiver or Manager of the property of a company on behalf of debenture holders.
- There are other restrictions that restrict jobs or positions a debtor can be appointed to.
The restrictions on the debtor apply after they have been discharged from bankruptcy for a further period of between two and 15 years, depending upon the level of the debtor’s misconduct or dishonesty before and during their bankruptcy. An Interim Bankruptcy Restriction Order imposes the restrictions on a debtor until AiB or a sheriff decides if an Order is to be granted or not.
What happens after a BRO is granted?
When a Bankruptcy Restriction Order is granted and the restrictions are imposed on the debtor, the details and the debtor, are recorded in the Register of Insolvencies.
The Register is a public record which records details of all individuals who are bankrupt and who have granted Protected Trust Deeds in Scotland, as well as details of insolvent companies in Scotland. Access to the Register is free. More serious cases of misconduct can be reported in the press.
When a BRU/BRO is granted and the restrictions are imposed on the debtor, the details of the BRU/BRO and the debtor are recorded in the Register of Insolvencies (RoI). The RoI is a public record which records details of all individuals who are bankrupt and who have granted Protected Trust Deeds in Scotland, as well details of insolvent companies in Scotland. Access to the RoI is free.
AiB also records a full list of Current Bankruptcy Restriction Orders and Undertakings. More serious cases of misconduct can be reported in the press.
A Bankruptcy Restrictions Guide is available, which can be viewed on our website or sent out on request.