The Protected Trust Deeds (Scotland) Regulations 2013

Made: 6th November 2013

Coming into force: 28th November 2013

In accordance with section 72(2) of that Act[^f00002], a draft of this instrument has been laid before and approved by resolution of the Scottish Parliament.

PART 1 — GENERAL

Citation and commencement

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These Regulations may be cited as the Protected Trust Deeds (Scotland) Regulations 2013 and come into force on 28th November 2013.

Interpretation

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• (1) In these Regulations—

• “the Accountant” means the Accountant in Bankruptcy;

• “the Act” means the Bankruptcy (Scotland) Act 1985;

• “the 2008 Regulations” means the Protected Trust Deeds (Scotland) Regulations 2008[^f00003];

• “Common Financial Statement” means the style and format for income and expenditure categories under that title (and, where relevant, related spread sheets, budget sheets, trigger figures, guidance materials and notes) published by the Money Advice Trust[^f00004];

• “common financial tool” has the meaning given by section 5D(1) of the 1985 Act;

• “the EU Regulation” means Council Regulation (EC) No 1346/2000 of 29th May 2000 on insolvency proceedings[^f00005];

• “notified creditors” means all creditors to whom a trustee has sent documents in terms of regulation 10 (except for a secured creditor who has agreed not to claim in terms of regulation 6(c) in respect of excluding a dwellinghouse or part of a dwellinghouse);

• “relevant period” means the period of 5 weeks beginning with the date of registration of the notice referred to in regulation 9;

• “remuneration” means reasonable fees and outlays; and

• “trust deed” means a trust deed that is intended to become a protected trust deed.

• (2) A Form referred to by number in these Regulations means the Form so numbered in the Schedule.

Protected status

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• (1) A trust deed has the status of a protected trust deed if—

• (a) the conditions set out in regulations 4 to 10 are met; and

• (b) it is registered under regulation 11(2) in the register of insolvencies.

• (2) A trust deed has that status from the date on which it is so registered.

PART 2 — CONDITIONS OF PROTECTION

The debtor

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• (1) The debtor who grants the trust deed must do so for a single estate and must be—

• (a) a living individual;

• (b) a partnership;

• (c) a limited partnership (within the meaning of the Limited Partnerships Act 1907[^f00006]);

• (d) a trust;

• (e) a corporate body; or

• (f) an unincorporated body of persons.

• (2) The debtor must not be—

• (a) a debtor whose estate has been sequestrated and the trustee in the sequestration has not been discharged under section 57 or 58A[^f00007] of the Act; or

• (b) an entity referred to in section 6(2) of the Act.

• (3) The total amount of the debtor’s debts (including interest) at the date on which the debtor grants the trust deed must be not less than £5,000.

The trustee

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The trustee under the trust deed must be a person who would not be disqualified under section 24(2) of the Act from acting as the replacement trustee were the debtor’s estate being sequestrated.

Exclusion of a secured creditor

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Where a secured creditor is excluded from a trust deed under section 5(4A)(b)(ii)[^f00008] of the Act, prior to the debtor granting the trust deed—

• (a) the trustee must provide the debtor and the secured creditor with a valuation, made by a chartered surveyor or other suitably qualified third party, of the dwellinghouse (or part) which is to be excluded from the estate conveyed to the trustee under section 5(4A)(b)(i) of the Act;

• (b) the debtor must, in Part 1 of Form 1A, request obtaining the secured creditor’s agreement not to claim under the trust deed for any of the debt in respect of which the security is held; and

• (c) the secured creditor’s agreement must be set out in Part 2 of Form 1A.

Statements in relation to trust deed

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• (1) The trust deed must state—

• (a) that, subject to any exclusion mentioned in section 5(4A)(b)(i) of the Act, all of the debtor’s estate (other than property listed in section 33(1) of the Act or which would be excluded under any other provision of the Act or of any other enactment from vesting in the trustee of a sequestrated estate) is conveyed to the trustee;

• (b) that the debtor agrees to convey to the trustee, for the benefit of creditors generally, any estate (wherever situated) which—

• (i) is acquired by the debtor during a period of 4 years beginning with the date on which the trust deed is granted; and

• (ii) would have been conveyed to the trustee under paragraph (1)(a) if it had been part of the debtor’s estate on the date on which the trust deed was granted; and

• (c) that any contribution from income for the benefit of creditors , including any contribution required by the common financial tool where the debtor is a living individual, is payable in accordance with regulation 8.

• (2) Where the debtor’s dwellinghouse, or part of the debtor’s dwellinghouse, is excluded as mentioned in section 5(4A)(b)(i) of the Act from the estate conveyed to the trustee, the trust deed must also include details—

• (a) of any secured creditor who has agreed not to claim under the trust deed for any of the debt in respect of which the security is held; and

• (b) of that debt.

• (3) Before the debtor grants the trust deed—

• (a) the trustee must advise the debtor that granting the deed may result—

• (i) in the debtor’s estate being sequestrated;

• (ii) in the debtor being refused credit, whether before or after the debtor’s discharge under regulation 24;

• (iii) subject to any exclusion mentioned in section 5(4A)(b)(i) of the Act, in the debtor not being able to remain in the debtor’s current place of residence;

• (iv) subject to any such exclusion, in the debtor being required to relinquish property which the debtor owns;

• (v) in the debtor being required to make contributions from income for the benefit of creditors;

• (vi) in damage to the debtor’s business interests and employment prospects; and

• (vii) in the fact of the debtor having granted a trust deed becoming public information;

• (b) the trustee must provide the debtor with a copy of a debt advice and information package referred to in section 10(5) of the Debt Arrangement and Attachment (Scotland) Act 2002[^f00009]; and

• (c) the trustee and the debtor must sign a statement to the effect that the trustee has fulfilled the duties referred to in this paragraph.

Payment of debtor’s contribution

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• (1) Where this regulation applies, the trust deed must state that the debtor must, during the payment period, pay the debtor’s contribution from income at regular intervals , as required by the common financial tool where the debtor is a living individual.

• (2) The payment period is—

• (a) a minimum period of 48 months beginning with the date on which the trust deed was granted;

• (b) such shorter period as is determined by the trustee; or

• (c) such longer period as is—

• (i) determined by the trustee where there is a period during which the debtor did not pay the debtor’s contribution; or

• (ii) agreed by the debtor and the trustee.

• (3) The trustee may determine a shorter payment period only if, in the opinion of the trustee, payment of the debtor’s contributions (from income or otherwise) during the shorter period would allow distribution of the debtor’s estate to meet in full the total amount of the debtor’s debts (including interest) at the date on which the debtor grants the trust deed.

• (4) Where the debtor is a living individual, the debtor’s contributions from income must be such as to result over the payment period in the payment of a sum less than the total amount of the debtor’s debts (including interest) at the date on which the debtor grants the trust deed.

• (5) In calculating the debtor’s contributions from income for the purposes of paragraphs (1) and (4), the whole of the debtor’s surplus income over the amount allowed for expenditure in the statement of the debtor’s income and expenditure supplied under regulation 10(1)(d)(ii) must be applied.

Notice in the register of insolvencies

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After the trust deed has been delivered to the trustee, the trustee must without delay send a notice in Form 1 to the Accountant for publication by registration in the register of insolvencies.

Documents to be sent to creditors

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• (1) Not later than 7 days after registration under regulation 9, the trustee must send to every creditor known to the trustee (other than any secured creditor who has under section 5(4A)(b)(ii) of the Act agreed not to claim under the trust deed for any of the debt in respect of which the security is held)—

• (a) a copy of the trust deed;

• (b) a copy of Form 2 (to enable a creditor to make a statement of claim);

• (c) a copy of the notice mentioned in regulation 9;

• (d) a statement of the debtor’s affairs, prepared by the trustee, containing—

• (i) a list of the debtor’s assets and liabilities;

• (ii) a statement of the debtor’s income and expenditure as at the date on which the trust deed was granted , in Form 2A where the debtor is a living individual;

• (iii) a statement as to the extent to which those assets and that income will not vest in the trustee;

• (iv) a statement as to whether, and if so on what basis, the EU Regulation applies to the trust deed;

• (v) if the EU Regulation does apply to the trust deed, a statement as to whether the proceedings are main proceedings or territorial proceedings;

• (vi) a statement as to whether the creditors are likely to be paid a dividend and the amount of the dividend that is expected to be paid;

• (vii) if the case is one in which there is an exclusion such as is mentioned in section 5(4A)(b)(i) of the Act, a statement by the trustee, on the basis of the information for the time being available to the trustee, as to what the effect of that exclusion is likely to be on any such dividend;

• (viii) a statement that the trustee on request must provide a copy of any valuation held by the trustee which has been made by a third party and which relates to an asset of the debtor, any statement showing the amount due by the debtor under a security and any document showing the income for the time being of the debtor;

• (ix) a copy of any agreement in Form 1B referred to in regulation 15(2);

• (x) a statement explaining the conditions which require to be fulfilled before the trust deed will become a protected trust deed and the consequences of it becoming a protected trust deed;

• (xi) details of any protected trust deed in respect of which, in the 6 months preceding publication of the notice provided for in regulation 9, the debtor has been discharged or refused a letter of discharge in terms of regulation 24(1) or (8) (or regulation 19(1) or (5) of the 2008 Regulations);

• (xii) where a secured creditor’s agreement has been obtained under regulation 6(c), a statement containing the valuation made by virtue of paragraph (a) of that regulation and a statement of the amount owed, in respect of the security held, to that creditor; and

• (e) a statement in Part 1 of Form 3 of the trustee’s anticipated realisations from the trust deed.

• (2) The trust deed must be acceded to by the notified creditors but is deemed to have been acceded to by them unless, within the relevant period, the trustee receives notification in writing from a majority in number, or no fewer than one third in value, of the notified creditors that they object to the trust deed being granted protected status.

PART 3 — REGISTRATION AND EFFECT OF PROTECTION

Registration of the trust deed etc.

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• (1) As soon as reasonably practicable after the expiry of the relevant period (and in any event no later than 4 weeks after that expiry), the trustee must send to the Accountant for registration in the register of insolvencies—

• (a) a copy of the trust deed;

• (b) either—

• (i) a copy of every form of agreement obtained by virtue of regulation 6(c); or

• (ii) a statement by the trustee that no such form of agreement has been obtained;

• (c) a statement by the trustee that those creditors, if any, who have objected in writing to the trust deed during the relevant period do not constitute a majority in number, or one third or more in value, of the creditors;

• (d) a copy of the statement referred to in regulation 7(3)(c);

• (e) a copy of the statement referred to in regulation 10(1)(d);

• (f) a copy of any agreement in Form 1B referred to in regulation 15(2);

• (g) a statement in the form of Form 3; and

• (h) where a debtor who is a living individual makes a contribution from income,—

• (i) a statement that the amount of that contribution is in accordance with the common financial tool as assessed by the trustee; and

• (ii) any evidence or explanation required in applying the common financial tool.

• (2) The Accountant must register the trust deed in the register of insolvencies if—

• (a) the Accountant has received all the documents required to be sent under paragraph (1);

• (b) the conditions set out in regulations 4 to 10 have been met; and

• (c) the Accountant is satisfied in accordance with the common financial tool with the amount of the contribution determined.

• (3) The trustee must notify the debtor and every creditor known to the trustee of the registration of the trust deed in the register of insolvencies or the refusal by the Accountant to so register the trust deed by no later than 7 days after receipt of the notification of the same by the Accountant.

Effect of protected status

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• (1) Where a trust deed has become a protected trust deed then—

• (a) subject to regulation 17, a creditor who (either or both)—

• (i) is not a notified creditor; or

• (ii) notified the trustee of objection to the trust deed during the relevant period,

has no higher right to recover the debt than a creditor who has acceded to, or been deemed by virtue of regulation 10(2) to have acceded to, the trust deed; and

• (b) an application for sequestration of the debtor’s estate may not be made by the debtor while the trust deed subsists.

• (2) A creditor ceases to be deemed to have acceded to a trust deed in terms of regulation 10(2) if the trustee refuses a request by the debtor to apply to the Accountant for discharge in terms of regulation 24(8).

• (3) Where a secured creditor’s agreement has been obtained under regulation 6(c) and the trust deed becomes a protected trust deed, that creditor is not entitled—

• (a) to make a claim under the protected trust deed for any of the debt in respect of which the security is held;

• (b) to do diligence against the assets conveyed to the trustee under the protected trust deed; or

• (c) to petition for the sequestration of the debtor during the subsistence of the protected trust deed.

Effect of protected status on diligence against earnings

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• (1) This regulation has effect where a trust deed has protected status.

• (2) Any existing earnings arrestment, current maintenance arrestment or, subject to paragraph (3), conjoined arrestment order ceases to have effect on the date of protection.

• (3) Any sum paid by the employer to the sheriff clerk under a conjoined arrestment order on a pay day occurring before the date of protection will be disbursed by the sheriff clerk under section 64 of the Debtors (Scotland) Act 1987[^f00010] notwithstanding that the date of disbursement is after the date of protection.

• (4) The execution of an earnings arrestment or the making of a conjoined arrestment order is not competent after the date of protection to enforce a debt in respect of which the creditor is entitled to make a claim under the trust deed.

• (5) A deduction from earnings order under the Debtors (Scotland) Act 1987 is not competent after the date of protection to secure the payment of any amount due by the debtor under a maintenance calculation within the meaning of that Act in respect of which a claim could be made under the trust deed.

Deductions from debtor’s earnings

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• (1) This regulation applies where—

• (a) a debtor is required to pay to the trustee a contribution from income for the benefit of creditors and an amount is required to be paid from the debtor’s earnings from employment; and

• (b) the debtor has failed on two consecutive occasions to pay to the trustee the required amount of the debtor’s income from the debtor’s earnings from employment.

• (2) Following a request by the trustee, the debtor must give the person by whom the debtor is employed an instruction in Form 4A to make—

• (a) deductions of specified amounts from the debtor’s earnings; and

• (b) payments to the trustee of the amounts so deducted.

• (3) The trustee may give the person by whom the debtor is employed an instruction of the type mentioned in paragraph (2) in Form 4B if the debtor fails to comply with the requirement imposed by that paragraph.

• (4) The employer must comply with an instruction provided in accordance with paragraph (2) or (3) (or varied in accordance with paragraph (9)).

• (5) On delivery of the instruction and while the instruction is in effect, the employer must deduct the sum specified in the instruction on every pay day, and pay the sum deducted to the trustee as soon as it is reasonably practicable to do so.

• (6) Where an employer fails without good cause to make a payment due under an instruction, the employer is—

• (a) liable to pay on demand by a trustee the amount that should have been paid; and

• (b) not entitled to recover from a debtor the amount paid to the debtor in breach of the instruction.