The Coronavirus (Scotland) (No 2) Act 2020 temporarily increased the minimum debt level which a debtor must owe a creditor before a creditor was able to commence a petition for sequestration (bankruptcy) from £3,000 to £10,000. This temporary increase in the debt threshold was due to come to an end on 31 March 2022 but was extended and is now due to end on 30 September 2022.
One of the biggest concerns with the minimum debt level being £10,000 albeit temporarily was that it reduced the options available to creditors who were/are owed more than £3000 but less than £10,000. A reversion to the previous £3,000 minimum debt level was, however, also criticised as failing to afford sufficient protection as the economic consequences of the pandemic emerged following the end of furlough and other protections such as the £20 universal credit uplift.
In a bid to strike a balance between the interests of creditors and debtors the Scottish Government has now permanently changed the minimum debt level to £5,000. This change comes into effect on 1 October 2022 via the Coronavirus (Recovery and Reform) (Scotland) Act 2022.
In essence it means that from 1 October 2022, any creditor owed a debt of £5,000 or more will be able to commence a petition for sequestration against the debtor who refuses to repay. Whilst this change will not help those creditors owed less than £5,000, with the contact we have had from many of our clients about getting the process started, there is little doubt the change is likely to result in an increase in the number of creditors petitioning for sequestration where the amount owed to them meets the minimum debt level of £5,000.
If you would like to discuss the process and costs involved in petitioning for sequestration please do not hesitate to contact Zibya Bashir either by email This email address is being protected from spambots. You need JavaScript enabled to view it. or by phone on 0141 221 1919.
