Extension of individual protection from insolvency in Scotland

Following the Coronavirus pandemic, the Scottish Government introduced two key Acts. The Coronavirus (Scotland) Act 2020 and the Coronavirus (Scotland) (No.2) Act 2020 - together, these Acts made two significant changes to personal insolvency in Scotland.

The 2020 Coronavirus (Scotland) Acts

The first was to increase the floor level for sequestration (bankruptcy) from £3,000 to £10,000, meaning someone cannot be sequestrated (made bankrupt) until they collectively owe creditors at least £10,000, and the second was to extend the "breathing space" moratorium available to individuals (providing them with protection from diligence while they take advice) from six weeks to six months.

It was anticipated that both of these changes would expire on 31 March 2022. However, the Coronavirus (Scotland) Act (Amendment of Expiry Dates) Regulations 2022 came into force on 30 March, which extended the increased floor limit for sequestration and the moratorium to 30 September 2022.

New Proposed Legislation

The Coronavirus (Recovery and Reform) (Scotland) Bill is also currently going through the parliament committee stage, having been introduced on 25 January 2022. This has a wide remit including, in relation to bankruptcy, allowing service of documents electronically and allowing meetings of creditors to be held remotely. It is also seeking to change the floor level for sequestration to £5,000. This is an increase of the pre-covid level of £3,000 but far short of the £10,000 pandemic-era limit. The Bill makes no mention of making the current six-month moratorium a permanent feature of legislation, so it remains to be seen whether the extended moratorium period will continue after 30 September.

Having only been introduced at the start of this year and the Scottish Conservatives already advising they will be seeking amendments to the proposed legislation, it is unclear when or to what extent this Bill will be enacted.

Here at Brodies we are experts in advising on all aspects of personal insolvency. We assist both creditors and debtors so if you have any questions on the impact of this extension, we are here to help.