Section 4 — Effect of debt payment programmes

Part of Debt Arrangement and Attachment (Scotland) Bill: Stage 3 – in the Scottish Parliament at 3:45 pm on 13th November 2002.

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Photo of Richard Simpson Richard Simpson Labour 3:45 pm, 13th November 2002

We discussed and rejected the content of amendments 35 and 38 during stage 2. Both concern what happens to creditors' rights in relation to heritable property when a debtor enters a debt payment scheme, but the bill already provides that all diligence and sequestration will be stopped. Subsections 4(2) and (3) prohibit creditors from commencing or executing any diligence for payment or seeking to sequestrate a person who participates in a scheme. As that includes inhibition, amendment 38 is unnecessary.

Amendment 35 would have wide-reaching implications for other areas of law, such as contract and property law. The restrictions that are referred to in the amendment would inevitably cause lenders to change their practices.

The Executive has followed the approach of the Scottish Law Commission, which first recommended a debt arrangement scheme in 1985 in its "Report on Diligence and Debtor Protection". We consider that, although 16 years have passed since the Law Commission's report, many of its conclusions on matters of legal principle remain valid today. In our consultation document, we suggested that heritably secured debt should not be part of a debt arrangement scheme. It is worth noting that that is not, of course, part of the voluntary arrangements on which the bill is intended to build.

Restraints on the calling up of standard securities could be considered appropriately only in a full review of heritable securities over the homes of all debtors, taking account of all the implications for property and contract law.

We must consider any such exemptions both in light of the scheme as a whole and cumulatively. For example, for how long could a debt payment programme run? If it could run for, say, nine years, or if there were no time limit, a lender would be unable to recover potentially valuable property over decades. As we have said before, we would be worried about the effect that that could have on the economy and the availability of mortgages.

We believe that amendments 35 should be withdrawn or, failing that, rejected, and that amendment 38 should not be moved.