Review of Scotland’s statutory debt solutions – Stage 3 Consultation
This consutlation forms the latest part of stage 3 of the Scottish Government’s review of Scotland’s statutory debt solutions – Sequestration (known by some as Bankruptcy), Minimal Asset Procedure, Protected Trust Deeds, and Debt Arrangement Scheme.
A working group was formed of members from R3’s Scottish Technical Committee to respond to the consultation. The group consisted of the following R3 members –
- Eileen Maclean (Lead) (Insolvency Support Services Limited) – LinkedIn
- David Menzies (ICAS) – LinkedIn
- Emerita Professor Donna Mckenzie Skene (University of Aberdeen) – LinkedIn
- Dr Alisdair MacPherson (University of Aberdeen) – LinkedIn
R3’s response was formally submitted on 4 June 2025
A summary of the key points from the response are as follows:
Concerns about the Consultation Process
R3 reiterated concerns about the consultation process, stating that it lacked the detailed consideration they expected and did not sufficiently address the issues raised in the previous Stage 3 response nor in the Stage 2 consultation. Furthermore, R3 highlighted the absence of an insolvency practitioner (‘IP’) on the consultation team and the missed opportunity to examine the underlying assumptions and policy issues related to debt solutions in Scotland.
Summary of points covered by the consultation
- Minimal Asset Process (MAP): R3 agreed that land and property should continue to be excluded, but opposed an increase to the MAP limit (from £25,000 to £50,000) on the basis that Sequestration is a protective function for creditors and the public.
- Debt Arrangement Scheme (DAS): R3 opposed a blanket rule mandating the removal of interest, fees and charges upon revocation, suggesting instead a more nuanced approach.
- Values and Principles: R3 objected to the proposed fourth principle noting that the existing principles were not enshrined in legislation.
- Reluctance to enter Insolvency: R3 commented that while consumer debt has become more acceptable, the stigmatisation of business failure has not changed. Small business owners, the self-employed and charities may be reluctant to enter into insolvency due to the wider impact on being able to run their business and the impact on their income.
- Common Financial Tool: R3 supported the principle of having a standardised platform for financial assessment and look forward to contributing to a consultation regarding the possible options available.
- Repayments: R3 agreed with the principle of splitting increased income but expressed reservations regarding the practicalities of collecting and administration.
- Treatment of the Family Home: R3 called for a detailed consultation on this matter, highlighting that the consultation did not consider the outright exemption, or exclusion, of the family home from insolvency procedings.
- Other assets: R3 supported an increase in the current limit for vehicles treated as an exempted asset, and also for the exemption of mobility scooters.
- Matters Linked to Insolvency: R3 highlighted the limitations of the insolvency regime in deficit budgets and emphasized that it was outside the scope of insolvency law.
- Change of terminology: R3 expressed concern at the proposed amendment from “debtor” to “consumer”, stating that “consumer” ignores the legal definition of debtor in accounting and bankruptcy legislation and also ignores and excludes the legal entities treated as an individual in bankruptcy legislation (eg. partnerships, trusts, limited partnerships, et al.)
- Use of Technology: R3 supported the use of technology but cautioned against the complete removal of human interaction highlighting the requirements of SIP3.3.
- Role of the Accountant in Bankruptcy: R3 acknowledged there is a perceived conflict of interest regarding the AiB’s policy role, but the practicalities of separating that would lead to expense, upheaval and a lack of clarity.
New layer