The Changing Face of Debt Recovery
The procedures for enforcing Court Awards, known in Scotland as ‘Diligence’, were largely reformed by the Bankruptcy and Diligence (Scotland) Act 2007. Since 2002, the Scottish Government has released annual national statistics on the use of diligence and these allow us to see in black and white the impact of the 2007 reforms.
The figures reveal an ever increasing use of alternative tactics in debt recovery. In the last ten years, there has been an increase of 134% in the use of diligence, with 387945 diligences executed in the last year. The vast majority of these diligences are at the behest of local councils, who have been particularly proactive towards debt recovery.
The key changes in the use of diligence in recent years are that:-
- Non earnings arrestments are on the rise – This is largely due to the introduction of a Protected Minimum Balance [PMB] by the 2007 Act. The PMB means that a debt cannot be enforced by diligence against the last £415 in a debtor’s bank account. This has led to more non-earnings arrestment as an alternative where bank arrestment is no longer available.
- Earning Arrestments have doubled – Another change by the 2007 Act is the addition of a new s.70A to the Debtors (Scotland) Act 1987. This obliges employers to provide creditors with a worker’s new employment details when employment with the current employer ceases. Armed with this information, earning arrestments have become easier to enforce.
The greater use of diligence procedures in recent years does tend to suggest that they are proving successful. However the widespread abuse of poinding and warrant sales was the primary reason for the 2007 diligence reforms and there are concerns in some quarters that arrestments may be heading down a similar path.