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Poorest may be hit hardest by Insolvency proposals

Proposed changes to Scottish personal bankruptcy law could trap debtors in long-term agreements crippling them financially for years, according to leading insolvency trade body R3 and the Institute of Chartered Accountants of Scotland (ICAS).

The organisations say that a proposal to base repayment contributions on a fixed percentage of an individual’s income without assessing their circumstances, could unduly impact upon the poorest in society. They are concerned it will leave individuals unable to meet day-to-day living expenses simply to finance historic debt.

The proposals to set a minimum dividend payment of 50p in the pound through the Protected Trust Deed (PTDs) scheme will also have a significant impact. The proposed minimum dividend of 50p is unrealistic and could deprive debtors and creditors of the useful PTD option. Debtors may face decades of poverty as a result of these proposals by the Accountant in Bankruptcy (AiB). Significantly extended repayment periods are likely to restrict a large number of Scots to a life of limited credit and large repayments.

John Hall, Scottish R3 council member, comments: “Given that many Scots are simply surviving at the moment by only paying the interest on their debts and that tens of thousands are being made bankrupt each year, it is questionable whether now is the right time to make the conditions even tougher for some of the most vulnerable people in society.”

“The proposed changes have not been welcomed by creditors or consumer groups and will have an adverse impact on the Scottish economy at exactly the time when it needs a boost.”

Rachel Grant, Chair of R3’s Scottish Technical committee, comments: "The proposal to introduce several new personal insolvency "products" will make the system unnecessarily complicated with no discernible benefit to debtors or creditors. Additional cost to the public purse and the potential for manipulation or abuse of the system are also concerns which have been raised.

“The proposal to remove creditor driven petitions from the courts is also very worrying. Bankruptcy significantly impacts on an individual's rights and property and deserves to have the scrutiny of the courts"

Bryan Jackson, Chair of the ICAS Insolvency Committee and a corporate recovery partner with PKF, explains: “These changes will benefit nobody. It is unlikely that creditors will see an improved return. Debtors will be tied to debts for many more years than at present, unable to experience financial stability for almost a decade. Society will not benefit from losing hundreds of thousands of consumers who otherwise might be able to spend money improving the economy.“

“Nobody wants to let debtors off the hook, particularly if they are able to pay, but these changes could punish individuals for a considerable period of time for debts which may have been run up due to unforeseen circumstances. Perhaps what people don’t always appreciate is that the most common reasons individuals become indebted is due to ill health, redundancy, and divorce and not always financial profligacy.”


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R3 Press Office

Notes to editors:

  • R3 is the trade body for Insolvency Professionals and represents the UK’s Insolvency Practitioners.

  • R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see for further information.

  • R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by recognised professional bodies
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.