1. AiB Stakeholder Session Inverness 10 February 2016 Bankruptcy Reforms – Story so far

2. Principles behind Personal Insolvency Reforms Money/debt advice at the centre of statutory debt management and debt relief Those debtors who can pay should pay their debts Removing the stigma, and breaking the cycle Acknowledges the wide range of circumstances and events that contribute towards bankruptcy for individuals and businesses Secures the best return for creditors – ensuring that the rights and needs of those in debt are balanced with the needs of creditors and businesses

3. BADA(S) Act – Key Changes BADA(S) Moratorium on Diligence Mandatory Money Advice Common Financial Tool Debtor Contribution Order Minimal Asset Process Decision Review Transfer of Court Functions BRO Changes Financial Education Discharge Process

4. Bankruptcies, PTDs and DAS DPPs

5. Awards of Bankruptcy 2014/15 Q1Q2Q3Q4 Awards of Bankruptcy1756(↓10.5%)1654(↓3.9%)1580 (↓5.6%)1740 (↓1.0%) Creditor Petitions317(↑39.6%)338(↑7.0%)322(↓0.1%)408(↓0.7%) Trust Deed Petitions9221 Debtor Applications1430(↓14.7%)1314(↓5.6%)1256(↓5.7%)1331(↓0.8%) 2015/16 Q1Q2Q3Q4 Awards of Bankruptcy757(↓56.9%)965(↓41.7%)989(↓37.4%) Creditor Petitions298(↓6.0%)268(↓20.7%)273(↓15.2%) Trust Deed Petitions1-- Debtor Applications458(↓68.0%)697(↓47.0%)716(↓43.0%)

6. Personal Insolvency Breakdown

7. Moratorium on Diligence New provision – Similar to DAS Intimation Intention to apply for: –Bankruptcy –Protected Trust Deed –DAS Debt Payment Programme Provides a 6 week protection from diligence Only one moratorium permitted within each 12 month period Since they were introduced on the 1 st of April 2015 AiB has received over 1,600 moratorium applications

8. Mandatory Money Advice An application for sequestration may not be made unless the debtor has obtained advice from an approved money adviser: –Organisations accredited at Level 2 or above of Scottish National Standards –DAS approved MAs –Working for CAB –Council Money Advisers –IPs or those working for IPs Money Adviser now has a key role in the bankruptcy application process – important change

9. Mandatory Money Advice What are your views on the impact of mandatory advice? What are the advantages and disadvantages? What lessons can be learned from the initial 9 months of change?

10. Minimal Asset Process – Recap on Criteria Replaces LILA as minimal administration product for those with few assets/low income Debtor must be assessed by the Common Financial Tool as making no contribution Discharge process intimated to creditors at the date of award Debtor must not own any land Minimum debt level: £1,500. Maximum debt level: £17,000 Limited assets (not exceeding £2,000) Lower application fee – fixed at £90

11. LILA vs MAP Approx. 30% who would have qualified for LILA don’t qualify for MAP Despite this, the proportion of debtor applications via MAP has increased (compared to LILA) This is largely due to the decrease of Full Administration applications

12. Minimal Asset Process What are your views on the introduction of the minimal asset process? What are the advantages and disadvantages? What lessons can be learned from the initial 9 months of change?

13. Debtor Contribution Orders Debtor Contribution Orders (DCO) are set by AiB in all cases, even at a zero rate. Imposed at the award stage in debtor applications In creditor petition sequestrations, trustees must send proposals to AiB within 6 weeks of award DCOs apply for a period of 4 years Level of DCO subject to review and appeal DCO may be varied or quashed Debtor may apply for a payment break in certain circumstances, such as a period of unemployment, illness or separation DCO cannot be imposed where debtor’s income solely derived from benefits

14. The Common Financial Tool A Common Financial Tool (CFT) (currently the Common Financial Statement) is used as the standard mechanism to establish whether a debtor is able to make a contribution towards repayment of their debts Aim is to achieve consistency and transparency in relation to any determination of the level of contribution The use of the CFT is mandatory in respect of all statutory debt relief and debt management solutions in Scotland This impacts on Protected Trust Deed and DAS Regulations All of the surplus income will form the debtor contribution order Contingency of 10% of surplus income up to a maximum of £20 per month is allowable

15. DCOs & the Common Financial Tool In debtor bankruptcy applications DCOs are set at the award stage - is this a good idea? AiB sets all DCOs to ensure consistency even on cases with private trustees; how has this worked so far? Has the 4 year period for DCOs impacted demand for bankruptcy? All surplus income must be included in the DCO – what are your views on this policy? Using the CFT – what are your practical experiences? Is the CFT the best tool for calculating surplus income? Any other comments based on your experiences to date.

16. Transfer of Court Functions/New Functions Several Functions are transferring from the Court to AiB: –Recall – Applications for recall may be made to AiB, only on the ground that the debtor has paid or is able to pay their debts in full. –Application for a direction –Appointment, replacement & removal of a trustee –BRO – The decision to award a Bankruptcy Restriction Order for under 5 years, will now be made by AiB. –Annulment/variation of a BRO –Curing Defect in Procedure (Section 63) Decision Reviews have been introduced (prior to court appeal)

17. Transfer of Court Functions/New Functions - Activity Recalls –19 applications received –11 awarded, 8 in progress BRO referrals –34 referrals made since April 2015 – investigations in progress Applications for Curing Defect (Section 63A) –9 applications received, 8 granted (1 in progress) Directions –2 applications received and directions issued Reviews –8 review applications received (5 bankruptcy refusal, 3 DCO level) –2 upheld, 4 not upheld, 2 in progress

18. Transfer of Court Functions/New Functions What are your views on the transfer of functions from Court to AiB and decision reviews? What are the advantages and disadvantages? Any lessons learned to date?

19. Financial Education What this means Trustee (including AiB) must consider whether to refer a debtor for a course of financial education if certain circumstances are apparent: –Previous sequestration or PTD granted within previous 5 years –Analogous remedy was in force in previous 5 years –Debtor was party to a DAS DPP –Debtor is subject to BRO (or under investigation) –Pattern of behaviour would indicate that they would benefit –Debtor agrees to undertake a financial education course To date 163 referrals for financial education have been made 1,123 e-learners have signed up to financial capability

20. Financial Education What are your views on the introduction of the Financial Education? Should the responsibility for referring a debtor for financial education be extended? To money advisers for example? What does this mean for you or your organisation? Any suggestions or recommendations?

21. Discharge of Debtor Changes removed automatic discharge at 12 months Now contingent on compliance/cooperation Early days – first 10 month trustee reports due soon What impact is this change likely to have? Any experience to report so far – greater degree of cooperation? Any other views on this change?

22. Final comments/views Any other comments/views?

23. John Cook, Depute Accountant 0300 200 2926, john.@aib.gsi.gov.uk 1 Pennyburn Road, Kilwinning, Ayrshire, KA13 6SA T 0300 200 2600 F 0300 200 2601 W www.aib.gov.uk Thank you