Written Question · S3W-28827 · Session 3
Whether a family home gaining protection under provisions of the draft Home Owner and Debtor Protection (Scotland) Bill could be put at ris…
The question
To ask the Scottish Executive whether a family home gaining protection under provisions of the draft Home Owner and Debtor Protection (Scotland) Bill could be put at risk in the case where sequestration follows a trust deed, due to the action of an objecting creditor or the trust deed proposal failing later in the process.
The answer
If measures contained in the Home Owner and Debtor Protection (Scotland) Bill were introduced, it would be possible for sequestration to follow a trust deed where either it fails to become protected due to the action of an objecting creditor or as a result of the trust deed failing later in the process. This is no different from the current legislation.
Currently, the family home is at risk in all protected trust deeds and all sequestrations. The debtor would not be worse off under the provisions in the Home Owner and Debtor Protection (Scotland) Bill.
By allowing a trust deed which excludes specific assets, in particular, the family home to become protected, the Home Owner and Debtor Protection (Scotland) Bill will introduce protection for the family home in those cases where exclusion is appropriate and does not disadvantage the creditors.
Not all protected trust deeds will exclude the family home. This proposal will allow insolvency practitioners to assess the amount of the equity in the family home at the beginning of the trust deed and calculate its net worth to the general body of creditors after all costs are met. Where the equity is negligible or where the trust deed will produce a fair return to creditors from other assets or contributions, the trustee will have the flexibility to propose a trust deed to creditors which excluded the family home. The proposal in the bill does not change the ability of creditors to object to the trust deed. If creditors object, the debtor is no worse off than before and can suggest an alternative trust deed or apply for sequestration where the family home would be included.
This measure will make use of the knowledge and professionalism of insolvency practitioners by allowing them to guide debtors into solutions that are better targeted to their circumstances. The debtor will know at the outset that their home is safe from unsecured creditors, as long as they continue to comply with the terms of their trust deed. However, failure to comply may result in their sequestration and their home would be at risk.
Currently, the family home is at risk in all protected trust deeds and all sequestrations. The debtor would not be worse off under the provisions in the Home Owner and Debtor Protection (Scotland) Bill.
By allowing a trust deed which excludes specific assets, in particular, the family home to become protected, the Home Owner and Debtor Protection (Scotland) Bill will introduce protection for the family home in those cases where exclusion is appropriate and does not disadvantage the creditors.
Not all protected trust deeds will exclude the family home. This proposal will allow insolvency practitioners to assess the amount of the equity in the family home at the beginning of the trust deed and calculate its net worth to the general body of creditors after all costs are met. Where the equity is negligible or where the trust deed will produce a fair return to creditors from other assets or contributions, the trustee will have the flexibility to propose a trust deed to creditors which excluded the family home. The proposal in the bill does not change the ability of creditors to object to the trust deed. If creditors object, the debtor is no worse off than before and can suggest an alternative trust deed or apply for sequestration where the family home would be included.
This measure will make use of the knowledge and professionalism of insolvency practitioners by allowing them to guide debtors into solutions that are better targeted to their circumstances. The debtor will know at the outset that their home is safe from unsecured creditors, as long as they continue to comply with the terms of their trust deed. However, failure to comply may result in their sequestration and their home would be at risk.
In the Official Report
No contribution in the Official Report cites S3W-28827 by reference.