Notes for Guidance - Bankruptcy (Scotland) Act 2016 (as amended)

Trustees may find themselves vested with assets which are of no immediate or foreseeable realisable value but which might possibly acquire such a value at some point in the future.

The Act contains no provisions for abandonment of any asset, other than the debtor’s heritable property. It is the Accountant’s opinion the trustee should take no action which might be construed as a formal abandonment of such assets, unless it is burdensome in nature.

However, the trustee must consider the long term costs and implications to the debtor and creditors of retaining a vested interest which is unlikely to acquire any value for several years. It is in the interest of all parties to try and obtain an agreed settlement with the debtor over the asset which will allow the trustee to abandon their interest.

The trustee shall inform creditors and commissioners, if elected, of their proposals for approval to deal with such assets. If approval is not received the trustee can consider applying for a direction from the Accountant (see section 4.3).

The Act also contains no provisions for residual vesting after the discharge of the trustee. Assets vest in the trustee by virtue of their appointment.

Once discharged the appointment ceases to have effect and assets do not continue to vest in a trustee. Nevertheless, given the limited effect of section 145 of the Act, such assets do not automatically re-vest in the debtor but are in limbo. In practical terms there is nothing to stop the debtor transacting with such assets unless an interested creditor revives the bankruptcy following a petition to court.

Any vested right of the debtor, e.g. the fee in a life rent estate, does not re- vest in the debtor by virtue of their discharge whether or not the trustee has been discharged. If the trustee has been discharged their rights to such estate transmit to any successor in office and should not therefore be formally abandoned.

It would however be prudent to inform creditors and the debtor, in the final circular, of all identified assets and vested rights which the trustee does not intend to realise and to advise them of their future rights and obligations in respect of such assets and rights.

The Accountant will not grant a certificate of discharge to a trustee who has not provided suitable reasons for the abandonment of an asset.