Understanding the Bankruptcy and Diligence (Scotland) Act 2024: key reforms and implications

The Bankruptcy and Diligence (Scotland) Act 2024, which received Royal Assent on 15 July 2024, introduces significant reforms to Scotland’s debt and insolvency landscape. Scheduled to come into force on 25 June 2025, these changes aim to modernise debt enforcement mechanisms, enhance protections for individuals with serious mental health issues, and clarify procedures within the existing framework established by the Bankruptcy (Scotland) Act 2016.

Mental Health Moratorium: A New Protective Measure

A cornerstone of the 2024 Act is the introduction of a Mental Health Moratorium (MHM). This provision empowers Scottish Ministers to establish regulations that pause debt enforcement actions against individuals experiencing serious mental health problems. The MHM is designed to provide individuals with a respite from creditor actions, allowing them time to focus on recovery without the added pressure of debt enforcement. This initiative aligns with similar measures in England and Wales.

In order for the MHM to be applicable, the debtor requires to have a recognised mental health problem, which has been diagnosed by a mental health practitioner; and that mental health problem would be exacerbated by the debt enforcement action.

Key Amendments to the Bankruptcy (Scotland) Act 2016

The 2024 Act brings several modifications to the 2016 Act, focusing on procedural clarity and debtor protections:

• Recall of Sequestration (Section 4): The process for recalling sequestration is clarified. Notably, if a debtor repays their debts in full within six months of sequestration, interest accrued during that period is not payable, even if the recall application is made after this period.
• Trustee Resignation (Sections 11 & 12): Trustees are now permitted to resign if a debtor cannot be traced or has failed to cooperate. In such cases, trustees are entitled to remuneration and outlays up to the date of their resignation.
• Protected Trust Deeds: From 20 January 2025, trustees must provide debtors with both a Debt Advice and Information Package (DAIP) and a Trust Deed Information Document. Additionally, debtors must be given adequate time to consider these documents before proceeding.

 Modernising Diligence Procedures

The Act also modernises debt recovery mechanisms, known as diligence, to improve efficiency and fairness:

• Money Attachment: Sheriff officers are now authorised to execute money attachments outside the traditional 8 am to 8 pm window, provided the premises are open for business. This change aims to align enforcement practices with modern business hours.
• Arrestment of Ships: The Act permits the arrestment of ships on Sundays, expanding the timeframe for such actions and enhancing creditors’ ability to secure debts.
• Diligence on the Dependence: Before applying for a court warrant for diligence on the dependence, creditors must provide debtors with a DAIP. This requirement ensures that debtors are informed and have access to advice before enforcement actions commence.

Conclusion

The Bankruptcy and Diligence (Scotland) Act 2024 marks a further evolution in Scotland’s personal and corporate insolvency framework. It continues a pattern of introducing further protections for debtors, in this case particularly focusing on those dealing with serious mental health issues.

While certain provisions of the 2024 Act have already commenced, the majority are set to take effect on 25 June 2025. This phased implementation allows stakeholders, including insolvency practitioners and creditors, to prepare for the upcoming changes. It is advisable for these parties to review and update their procedures, documentation, and training to ensure compliance with the new legislation.

For more information please contact – Siobhan McQueen