Background

Part 1 of the Bankruptcy and Diligence etc. (Scotland) Act 2007 came into effect on 1 April 2008. Part 1 of the Act introduces a number of significant changes in the bankruptcy regime.  For instance:

• debtors will be discharged from bankruptcy after one year;
• debtors will now apply to the Accountant in Bankruptcy instead of the Sheriff Court for their own sequestration;
• a trustee in sequestration is precluded from registering or granting title to any heritable property of a debtor during a period of 28 days after the award of sequestration is recorded;
• a transaction with the debtor which takes place within 7 days of the date of sequestration will not be void, if the acquisition is for full value and the acquirer has acted in good faith;
• a debtor’s family home will re-vest in the debtor if their trustee does not begin action to sell it within three years of the award of sequestration

The changes introduced by this Act are not retrospective and only affect those sequestrations which arise on or after 1 April 2008.  Sequestrations made before this date will follow the existing procedure as set out under the Bankruptcy (Scotland) Act 1985.

New deeds in the Register of Inhibitions

The commencement of Part 1 of the Act will result in a number of new types of deed being recorded in the Register of Inhibitions.

Where the Accountant in Bankruptcy awards sequestration, a certified copy  of the determination of the award will be recorded.  This document confirms the appointment of the trustee in the sequestration, and to that extent it mirrors the effect of an Act & Warrant issued by the court.  The recording of the determination also has the effect of an inhibition against the debtor, and to that extent it mirrors the effect of the certified copy interlocutor which is recorded when the court awards sequestration.  (Practitioners should note that the inhibition created by the determination or interlocutor continues to have effect for three years, notwithstanding the reduction to one year of the period after which the debtor may be discharged).

Where the trustee has abandoned any heritable property to the debtor, the trustee is required to give the debtor a notice of abandonment of that property.  The trustee must then record a certified copy of that notice in the Register of Inhibitions.

Changes to Land Register procedures

There are a number of changes in the Keeper’s requirements regarding the documents to be produced with an application for registration in the Land Register, where either the trustee or the debtor is a party to a transaction.

In any application where the trustee takes or grants title, if that trustee has been appointed as a result of an application by the debtor to the Accountant in Bankruptcy, then the Keeper will expect to see either a certified true copy or an extract of the recorded determination as evidence of the trustee’s appointment.  The Keeper will also wish to ensure that title has not been taken during the 28-day period after the date of sequestration.

Where the debtor transacts with property which has been abandoned to him by the trustee, the Keeper will normally be able to rely on the entry in the Register of Inhibitions relating to the recorded notice of abandonment, but may request additional evidence if it is not clear whether the notice relates to the property in question.  In the event that the debtor transacts with the property within 7 days after the date of sequestration, the Keeper will normally expect to see a letter from the trustee, confirming that the transaction is protected by virtue of the provisions in section 17(2) of the 2007 Act.

Contact points

Any enquiries relating to the requirements for applications for recording in the Register of Inhibitions should be made to CAJR on 0131 479 3629 or by Fax on 0131 200 3917.

Any enquiries relating to the requirements for registration in the Land Register should be made to Pre-Registration Enquiries on 0845 607 0163 or by Fax on 0131 479 3675.