Changes to the costs of petitioning for sequestration in Scotland

There are several costs associated with presenting a creditor's petition for sequestration (bankruptcy) in Scotland. As you would expect there are court dues for presenting the petition, currently at £122, as well as sheriff officer and legal fees.

In Scotland bankruptcy is overseen by the Accountant in Bankruptcy ("AiB"). When a creditor presents a petition for a debtor's sequestration, they have to nominate either an insolvency practitioner or the AiB to be the trustee. Where a creditor nominates the AiB they must pay a fee to cover the AiB's administration costs of handling the case.

The Scottish Government has decided to reduce the costs a debtor has to pay when seeking their own sequestration. That initiative is being funded by the increased costs paid by creditors.

The Bankruptcy and Debt Arrangement Scheme (Miscellaneous Amendment) (Scotland) Regulations 2023 changes the level of fee payable where the AiB is nominated to act. From 6 February 2023 the deposit that a creditor must pay when nominating the AiB will go up from £300 to £750.

In England and Wales, the deposit to the Insolvency Service (the AiB equivalent) increased to £1,500 on 1 November 2022. The costs associated with bankruptcy in Scotland are therefore still considerably lower costs than elsewhere in the UK.

Whilst there is now an increase in costs, creditor petitions are still an economic tool where a creditor is owed £5,000 or more (being the threshold of debt required to bring sequestration proceedings). Sequestration is an effective way to hold debtors to account where they refuse to pay or are unable to meet their obligations. It is also worth bearing in mind that the AiB deposit is refundable in the event the debtor pays the debt post-presentation of the petition causing the petition to be withdrawn or dismissed.

At Brodies, we advise creditors and debtors on all forms of insolvency. As always with such matters, the key is to seek advice as early as possible from your Solicitor and an Insolvency Practitioner.