In recent weeks we’ve been looking at some of the terms that are used in the debt recovery industry and explaining what they are and how they work. Bankruptcy in Scotland is of course governed by Scots Law.
Insolvency can often be a fast method of recovering cash – particularly if your debtor wants to continue in business.
Insolvency can be instructed at different stages, either when using the Statutory Demand Procedure, or after judgment in a court action, where no payment has been made following the first stage of enforcement.

Bankruptcy
We can bankrupt individuals, sole traders or partnerships.

What do we do?
After we receive your instructions we prepare a bankruptcy petition and send it to the court for processing.  Once the court has done this we then serve the petition on the debtor.  This entire procedure should not take more than 2 weeks.
If the debtor is serious about carrying on in business - or for other reasons does not want to be declared bankrupt – we will be contacted with settlement proposals.  We’ll contact you immediately when this happens. 
If we do not hear from the debtor we’ll just proceed with a bankruptcy order.  This will not involve you in further expense.
Liquidation in Scotland

The emphasis should always be to spend money only where recovery prospects are good.

We can liquidate Limited companies.

What do we do?

We present a Petition for the appointment of a Provisional Liquidator.  This will take one-two weeks following receiving your instructions. 

The Provisional Liquidator will attend the company’s premises to assess whether the debt can be discharged by third party funds – usually cash injected personally by a company director or shareholder.

If the Provisional Liquidator is unable to get settlement he will assess whether it’s financially worthwhile taking the liquidation further – we’ll not proceed to the next stage without discussing the options with you.

A brief summary of the Procedure:
i.If the debtor company discharges the debt in full via funds from a third party then we will have the petition dismissed.
ii.If the debtor company is unable to discharge the debt but has sufficient assets to settle the liquidator's fees then we will proceed with the liquidation.
iii.If the debtor company is unable to discharge the debt and has insufficient assets to satisfy the liquidator's fees then we will have the petition dismissed.

Often Scottish businesses are reluctant to use the legal system, unless it is the only place left to turn. Scottish businesses, and people doing business in Scotland, need to use Scottish law obviously. One of the options open to you in Scotland is an Enforcement Option. In this blog we explain a little more about what an Enforcement Option is and why it can be of benefit to Scottish business.

Charge
This is the first stage of the enforcement process. Once decree (judgment) is granted, Sheriff Officers visit the debtor, leaving a formal demand for payment for the sum due with interest and expenses within fourteen days. If no satisfactory proposals are made further enforcement can proceed.

Arrestment
Third Party Arrestment  This process prevents a third party from making over money to your Debtor. An arrestment can be placed on these funds to settle your outstanding debt.

Bank Arrestment: If the debtor’s bank account details are known then an arrestment may be placed on the account to secure funds to satisfy the outstanding debt.

Earnings Arrestment: If the debtor is in employment one of the most effective procedures is ‘Earnings Arrestment’, which is the equivalent of the English ‘attachment of earnings’. An arrestment is placed in the hands of the debtor’s employer, meaning that a regular amount may be deducted from the debtor’s salary to satisfy the debt.  However, we should highlight that creditors will have to know the identity of the debtor’s employer.

If property is outside of a house, the process involved in the disposal of the debtor’s assets is known as ‘Attachment and Sale’. This is very similar to the English equivalent of ‘Execution against Goods’.

If the goods are in the debtor’s house the far more cumbersome process of having to persuade the court to grant an ‘Exceptional Attachment Order’ means this measure is not often used.

Inhibition

Of particular interest to creditors is ‘Inhibition’. In an effort to secure your debt, we may be able to inhibit the debtor from granting security or selling their heritable (fixed) property. This will include a house or commercial property if registered in the land register.

Both Arrestment and Inhibition can be used prior to judgment, although the creditor has to show that the debtor is in financial difficulty and possibly attempting to deplete assets.

Very often businesses are daunted by the legal system. Yet when it comes to recovering monies owed or trying to collect legitimate payment for work done often the law is the only place left to turn. Scottish businesses, and people doing business in Scotland, need to use Scottish law obviously. One of the options open to you in Scotland is a Statutory Demand. In this blog we explain a little more about what a statutory demand is and why it can be of benefit to Scottish business.

Statutory Demand

You should consider this option if you’re particularly concerned about payment of a large debt.  For individuals, we are able to issue a statutory demand for payment, though debts have to be greater than £3000.  The statutory demand procedure is also available for limited companies, though in this case the debt has to be greater than £750.

Subject to the debtor not denying the debt, or there being a genuine dispute, then we are able to proceed with an insolvency process.  You should supply invoices or a statement of account supporting the debt.

What we do

We prepare a formal demand in terms of either the Insolvency or Bankruptcy legislation and instruct court officers to serve it on your debtor.

If there is no denial within 21 days after service we are able to institute insolvency proceedings.

If there is a denial and you want to take the matter further then you still have the option to instruct a court action.

Scotland has its own legal system, quite separate from the rest of the UK. As such it is important that Scottish businesses and those outside Scotland but doing business within in are aware of this. We felt it might be beneficial to go over some of the area’s any business operating in Scotland might expect to encounter in relation to bad debt prevention and collection. 

Enforcement of Decrees
The responsibility for enforcing sheriff court decrees falls on sheriff officers.
The generic term for Scottish enforcement is known as ‘diligence’. Different measures are employed depending on whether the defender’s moveable property is situated either outwith or within a dwellinghouse. The effectiveness of diligence can best be described as a ‘filtering process’ with the slow payers settling earlier on in the enforcement regime.
Judgement enforcement in Scotland was radically reformed by the Debt Arrangement and Attachment (Scotland)Act 2002 and will be enhanced following implementation of the Bankruptcy and Diligence (Scotland) Act 2007. The legislation deals more sympathetically with individual consumer debtors. Commercial debtors have less protection.

THE DEBT ARRANGEMENT SCHEME
A central feature of the 2002 Act is the Debt Arrangement Scheme available to individuals and sole traders, allowing them the opportunity of repaying their debts in a managed way over a given period of time without the threat of enforcement. Such individuals should have surplus income to repay their debt by instalments.
During the existence of a DAS judgement enforcement and applications for the debtor’s bankruptcy will be prohibited. Also, it will be incompetent to carry out judgement enforcement whilst an application is being considered.