A new Bankruptcy and Diligence (Scotland) Bill was introduced in the Scottish Parliament at the end of April and is currently before the Economy and Fair Work Committee for “Stage 1” initial consideration.
The Bill’s flagship initiative is a new moratorium on debt recovery action for people with a mental illness – which is to be welcomed – however it doesn’t specify how this new initiative will work as it only creates enabling powers for Scottish Ministers to introduce the scheme by regulations.
Since May 2021, people in England receiving mental health crisis treatment in hospital or at home can apply online for a “mental health crisis breathing space”. It lasts for 30 days after crisis care ends.
When on the scheme, a landlord or lender and other companies can’t evict you for missed rent or mortgage payments; install a prepayment utilities meter; start or continue court action to get their money or charge interest or fees on payments you’ve missed.
If the new Scottish moratorium follows the existing general moratorium for debtors it won’t prevent eviction or repossession. It would have been easy to have specified some substance in the Bill on this welcome initiative. The rest of the Bill is largely technical and tidying up changes.
The 2022/23 Scottish diligence statistics reveal that over 91% of debt enforcement – “diligence” – occurs following a summary warrant in respect of council tax debts. That’s over 240,000 cases.
From this, the most popular form of debt enforcement was against a debtor’s bank account – over 188,000 cases. The second most common form of debt enforcement was earnings arrestments – seizure of part of a person’s wages – with 52,000 cases.
Last year the Scottish Parliament passed an amendment to increase the protected minimum balance (PMB) for bank arrestments from £566 to £1,000. That means the first £1,000 of money in your current account cannot be seized by a creditor so that you have money to live on and pay essential bills.
We’ve yet to do the same for those subject to wage arrestments. At the moment the PMB for wages is £655.83 per month. Anything over that can be claimed by a credit at 19%, rising to 23% of earnings exceeding £2,370.49 and 50% of earnings exceeding £3,563.83.
Govan Law Centre believes there is considerable scope and need in the present cost of living crisis to increase the PMB for earning arrestments closer to the £1,000 PMB for bank account arrestments. Such a simple change would create a profound respite for those in crisis debt because of the cost of living crisis.