Policies and procedures about an agreed Debtor Contribution Order (DCO): FOI rlease

Information requested

1. What policy and procedures does the AiB require to be followed when a previously agreed (and complied with) DCO comes to be considered by AiB to be inadequate in quantum to discharge the creditor claim plus appropriate fees and expenses.

Specifically:

1. In what terms has the AiB authorised its subcontractors to raise s113 proceedings on the sole grounds of that opinion without first making enquiry as to whether the debtor’s circumstances have improved so as to be able to pay an appropriately increased DCO.
2. In acting fairly towards any debtor, should the trustee first make application to the DCO review team to authorise such an increase before instituting s113 proceedings.
3. In its capacity as a statutory Officer of the Court would it be considered to be acceptable for the AiB or its agent to represent to the court that it was of the opinion that the relevant sums could not be recovered to pay the creditor in full, without first exploring the aforesaid procedures?

Response

1. The Accountant in Bankruptcy (The Accountant) as trustee in a sequestrated estate must have regard to The Bankruptcy (Scotland) Act 2016 (The Act) and associated regulations.The Act sets out:

Section 50(1)(a) – Functions of a trustee:

• to recover, manage and realise the estate of the debtor, whether situation in Scotland or elsewhere

and

Section 90 - Debtor contribution order: general:

• AiB must make an order fixing the debtor's contribution (a “debtor contribution order”)—

(a)in the case of a debtor application, at the same time as awarding sequestration of the debtor's estate,
(b) in the case of an award of sequestration following a petition under section 2(1)(b), after considering initial proposals for the debtor's contribution provided by the trustee.

Therefore, the trustee has a duty to realise assets and ingather contributions to pay a dividend to creditors. There is no prescriptive process to undertake these actions as each case is dealt with on the individual circumstances.

A debtor contribution order will be made for the full amount of surplus income and is set for a period of 48 months. A review will be carried out regularly to assess whether payments should increase, decrease, cease or be extended until all 48 payments are made. Once this period has expired, or the DCO is ended, no further payments under the order can be made. Further details of how a Debtor Contribution Order is made can be found at section 85 of the Act, Part 3 of the Bankruptcy (Scotland) Regulations 2016, the Notes for Guidance - Common Financial Tool and Section 8 of the Notes for Guidance Bankruptcy (Scotland) Act 2016.

Each case is dealt with under individual circumstances and an increased DCO may not be appropriate. A trustee will regularly review a case and assess at which point additional assets require to be realised. For heritage assets the trustee will assess the available equity, request proposals, which could include purchasing the equity (by payment of a lump sum or by installments) or consent to the sale of a property. If these are not forthcoming the trustee will consider an application to court for permission to sell.

2. After taking the above into consideration a Provider can instruct:

• a review of a written offer and prepare a disposition from a third part - where another party is selling the property or a spouse is buying out the trustee's interest;
• conveyancing of a property;
• action for division and sale;
• action for right to sell (consent) - where the debtor or other party has been unco-operative or cannot be traced;
• using the single letter service, to trigger a response where previous attempts have been unsuccessful;
• any other legal action in connection with heritable property - where the Agency's consent has already been provided for that specific action;

3. An application can be made to the Review Team if a party does not agree with the decision of a trustee or AiB only in certain circumstances which are laid out in Regulation 21 of the Bankruptcy (Applications and Decisions) (Scotland) Regulations 2016. When requested and required to do so, they will undertake this independently from the original decision maker. Therefore, it is not appropriate for the team to be involved prior to a decision being made.

4.As stated above a trustee will regularly review a case and assess at which point additional assets require to be realised based on the individual circumstances pertaining to a case.

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