Scotland bankruptcy reform law passed at Holyrood

MSP Jenny Marra hit out at new legislation from the Scottish Government which will see people who become bankrupt made to pay debts for four years instead of three.

As a result of that, she said Scotland would have the “longest period of bankruptcy in the whole of the United Kingdom”.

That claim was rejected by Enterprise Minister Fergus Ewing, who said people in England repaying their debts through an individual voluntary arrangement would normally make payments for five years.

But Ms Marra insisted Mr Ewing was “not comparing like with like”.

She told MSPs: “Bankruptcy in England is not four years. He’s making Scotland have the longest period of bankruptcy in the whole of the United Kingdom and not letting people get back into the economy to be economically active.”

Ms Marra attempted to change the Bankruptcy and Debt Advice (Scotland) Bill so that bankrupts in Scotland would only have to pay contributions for three years, but this was voted down at Holyrood.

The Scottish Parliament then went on to unanimously approve the new legislation.

Mr Ewing said: “The fundamental principle which this Bill recognises and which this Government supports is that we believe that those who can pay and who are able to pay from their income should make a contribution, but those who cannot should not.

“This Bill seeks to bring forward that principle and apply it in a fairer and more consistent way.”

The majority of people who responded to a consultation on the issue said those who go bankrupt should pay for five years, Mr Ewing said.

He also stressed people would only be expected to make payments if they could reasonably afford to do so.

“Only those who can afford to pay a contribution towards the cost of their bankruptcy do pay,” he said.

“Currently only one third of those people who are bankrupt in Scotland pay a contribution, the remaining two thirds make no contribution payments whatsoever. We do not expect that to change.”

He also said that those whose sole income was from benefits would “pay no contribution whatsoever” if they became bankrupt.

Mr Ewing said: “We recognise it is extremely important to allow debtors relief under the bankruptcy and protected trust deed option, but we must provide fairness to creditors as well who must get a return on their money if it is reasonable they should do so.

“It is a matter of balance between the creditor and debtor, we believe the measures brought forward are fair.”

His stance was backed by Tory Murdo Fraser, who said: “As a matter of principle debtors should aim to repay as much as they can to their creditors of money that is owed. And extending the contribution period to 48 months would allow more money to be repaid.”