The emergency Coronavirus (Scotland) Bill was passed by parliament on Wednesday 1 April. Its emergency provisions are expected to come into force next week, the day after royal assent is granted. The precise date will be confirmed as soon as possible.
The majority of the measures being introduced seek to provide additional support for the people of Scotland in the coming months to help cope with the impact of the COVID-19 pandemic. These will expire automatically six months after coming into force but may be extended for two further six month periods, giving a maximum duration of 18 months. The Bill also gives the Government authority to end some (or all) of the powers at any point should they no longer be required. It also imposes a duty on the Government to report to Parliament on the use made of the powers after two months. A further bill is likely in around a fortnight’s time.
Changes to AiB Process
Currently, the statutory moratorium offers protection from creditor debt enforcement for a period of 6 weeks to those struggling to pay their debts. This period of breathing space allows individuals to obtain money advice and consider their options, before potentially choosing to enter a statutory debt solution. One moratorium is allowed per rolling year.
The moratorium is available to an individual, or certain legal persons who are permitted to apply for sequestration under the terms of the Bankruptcy (Scotland) 2016 Act:
(a) a trust in respect of debts incurred by it;
(b) a partnership (including a dissolved partnership);
(c) a body corporate;
(d) an unincorporated body; and
(e) a limited partnership (including a dissolved limited partnership) within the meaning of the Limited Partnerships Act 1907, or jointly by, as the case may be, the trustees, partners or members of any of those persons
The revised moratorium provisions provide protection from creditor debt enforcement action for a period of six months. The rule that currently restricts moratorium applications to one per year has also been rescinded. Moratorium applications can continue to be submitted electronically here. The application page will be updated on the AiB website when the Bill comes into force and updated instructions will be provided.
Applications can be submitted directly by those seeking protection, though it would be best for this action to be taken after appropriate advice is supplied. Free advice can be obtained from a variety of sources including Citizens Advice Bureaux, Local Authority Money Advice Units and debt advice charities.
The purpose of the extended moratorium is to:
reduce stress and protect the mental health of those worried about the prospect of creditor enforcement action during a time of increased uncertainty;
give additional time for options to be considered properly before potentially irreversible decisions are taken, particularly as advisers may find it difficult to see the volume of clients that need help; and
protect individuals whose problem debt is a direct result of COVID-19, and whose finances will normalise after the pandemic without the need for a formal debt solution.
We welcome the special measures such as mortgage holidays, introduced by creditors to support their customers through this difficult period and it is unclear how many individuals will now seek protection through the moratorium. It is important that only those who need protection should apply. When a moratorium is approved, the applicant’s details are published on the public Register of Insolvencies.
This is a serious step that should only be taken where necessary and could affect credit ratings. Usage will be monitored closely and credit checks may be performed on applications. If evidence suggests the moratorium is being used inappropriately, the extended duration may be revoked.
The Bill also introduced provisions on the use of electronic signatures. These will allow AiB to accept debtor bankruptcy application forms submitted with electronic signatures. Please note that the signature has to be created by the individual – this can be done through use of various software solutions or simply by the applicant emailing their money adviser / trustee with a simple statement averring that the relevant form is being submitted electronically with their consent. The statement must include the applicant’s name, address and date of birth. This should be uploaded to our BASYS case management system along with the relevant form(s).
We will provide a further update when royal assent is granted. If you require any more information in the meantime, please send an email to this address: - firstname.lastname@example.org. For the avoidance of doubt, the changes detailed in this article will only apply once the legislation comes into force.
AiB has a dedicated page on our website specific to emergency protocols and updates during the COVID-19 pandemic. It is advisable to check our website regularly for any updates, or sign up here to register to be notified whenever we publish new information.