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DEBT ARRANGEMENT & ATTACHMENT | |||||
| Almost as soon as the Scottish Parliament opened for business in 1999 a Members Bill was presented by socialist MSP, Tommy Sheridan, abolishing poindings and warrant sales. Sheridan's Bill was debated before the Parliament and was passed. Thus in one fell swoop effective Judgment enforcement was removed in Scotland.
Poindings and warrant sales occur when a Judgment creditor instructs Sheriff Officers to value a debtor's moveable property which can be subsequently sold at sale ? the process known as a "warrant sale". Without these duel sanctions Judgment creditors would have little armoury to enforce their contractual obligations. The Scottish Parliament was wrong footed by Sheridan's Bill. This is because their long-term aim was always to reform Scottish Judgment enforcement law but the position they were in with Sheridan's Act created a real problem for them because they knew every legal system adopted the principal of a debtor's moveable assets ultimately being disposed of in favour of a Judgment creditor. So what they did was pass an amendment to Sheridan's Act delaying its implementation until December 2002. This gave the Scottish Executive (government) slightly less than 2 years to introduce their own reforms. What the Executive would have to do would be to remove what were seen to be the "unacceptable excesses" of poindings and warrant sales whilst at the same time having an effective judgment enforcement regime in place. The result of all this effort was the Debt Arrangement and Attachment (Scotland) Act 2002. This introduced two brand new remedies known as "attachment" and "exceptional attachment orders". These were operational as of 1st January 2003 and effectively replaced poundings and warrant sales. However, the Debt Arrangement Scheme, whilst enacted in the legislation will not be operational for some time to come ? several years perhaps. These schemes will give individuals and sole traders the opportunity of repaying multiple debt in an orderly fashion and free from enforcement. However, much detail concerning the operation of the scheme, as well as its logistical implementation, necessitates a delay in its introduction. Whilst much of the criticism with poindings and warrant sales related to consumer debt, very little criticism was levied where enforcement had been taken against a commercial debtor. Initially the executive were attracted to an enforcement regime which could separate consumer from commercial debtors. However, in practice, this would be unworkable. It would be easy to identify a commercial debt where, for example, a limited company creditor was owed money from a commercial debtor with assets in city centre commercial premises. But it would be far more difficult to identify a commercial debt where, for example, a commercial creditor supplied kitchen equipment to a jobbing builder who carried on business from his house. The system introduced by the 2002 Act focussed on where the goods were located rather than the nature of the debtor. Whilst this is an over-simplification it is, perhaps, the best way to understand the Act. Attachment Orders Attachment orders generally will be used for business to business debts where it is obvious goods are located outwith a dwellinghouse. They offer a quicker and more streamlined system of judgment enforcement than Exceptional Attachment Orders and, indeed, the poindings and warrant sales regime which they replaced. "Exceptional attachment orders" will be used largely for consumer debt where goods are stored in a dwellinghouse. However because the definition of "dwellinghouse" will not include a garage then goods stored in a garage, which could of course include a car, can be realised by the Attachment Order route rather than its more cumbersome Exceptional Attachment Order brother. How are goods attached outwith a dwellinghouse? 1. Sheriff officers serve the debtor with a Charge for Payment, which will specify the sums specified in the Judgment together with any accrued interest. In addition the debtor should be served with a "debt advice and information pack". This gives the debtor a full explanation as to the enforcement options available to the creditor as well as details of organisations from whom the debtor can seek money advice. 2. Articles exempt from attachment. Generally speaking assets reasonably required for the debtor's business cannot be attached unless their aggregate value exceeds £1,000.00. Also any implements, tools of trade, books and other equipment reasonably required for the debtor's use and not exceeding in aggregate value £1000.00 will be exempt. 3. How does the Sheriff Officer carry out the attachment? Basically the Sheriff Officer enters the property and values the articles being attached at a price which they are likely to fetch if sold in the open market. The Sheriff Officer then reports the attachment to the Court within 14 days and gives the debtor 7 days notice of the date specified for the articles removal. The auction of the removed articles shall not take place until at least 7 days after they have been removed. The Sheriff Officer attends the auction and records what has been sold and remits the recovered monies to meet the creditor's claim. How are articles attached which are kept in dwellinghouse? Exceptional Attachment Orders Exceptional attachment orders give debtors greater protection than Attachment Orders but if granted the order will still allow for the debtor's goods being valued and thereafter removed for auction and subsequent sale. However, during the process debtors will have the opportunity of taking money advice and in some instances the court may require a personal visit from a money adviser before certain enforcement steps can be taken. The effect of this could slow down the recovery process. The quid pro quo should be the information gleaned from the advice will allow creditors to make better informed decisions as to their enforcement choices leading to more targeted enforcement. How does the process work? 1. Sheriff Officer serve a Charge for Payment specifying the sums due to the creditor and the debtor should also have been served with the debt advice pack. 2. Applying for the Exceptional attachment order. Application is made to the court which will only grant it once the Sheriff (Judge) is certain"matters" exist and also that "exceptional circumstances" prevail. Even then the order will only apply to the debtor's non-essential assets kept in any dwellinghouse specified in the application. So what are the exceptional circumstances? In an effort to encourage less intrusive enforcement, the court will want to be satisfied that negotiations and earnings arrestment have first been attempted. In addition the court will also want to know if there is "a reasonable prospect" that the sum recovered from auctioning the debtor's goods will realise at least £100.00 and a reasonable estimate of the chargeable expenses. In addition the Sheriff will take account of other matters such as the nature of the debt (and in particular, whether the debt incurred relates to any tax or duty or any trade or business carried on by the debtor) whether the debtor resides in the dwellinghouse and whether the debtor carries on a trade or business in that dwellinghouse. In addition the Sheriff will investigate whether money advice has been given to the debtor and, indeed, can order a personal visit by a money adviser to a debtor. The Sheriff will then ask for the money adviser's report and thereafter decide whether or not the Exceptional Attachment Order should be granted. What happens if the exceptional attachment order is granted? If it is granted Sheriff Officers will be able to attend the debtor's dwelling and attach, remove and auction the debtor's non-essential assets. This can be done immediately unless the Sheriff Officer considers this will be impractical. The articles cannot be auctioned until 7 days have passed since their removal. The non-essential assets are all listed in the Act but they basically include such items as clothing; implements, tools of trade; articles required for the care or upbringing of a child; toys; all household effects such as beds, linen, chairs, tables, food, lights, curtains with the addition of computers and microwave ovens along with radios, telephones and televisions. Conclusion The previous enforcement regime of poindings and warrant sales were castigated as a way of punishing and degrading the poor. The new legislation as it relates to goods stored in dwellinghouses, will only allow their removal and sale on specific application to the court which will only grant it upon being satisfied that exceptional special circumstances exist. In addition if the debtor requires money advice this will be available too. The hope and expectation is that this should separate the debtors who can't pay their debts from those who can. Hopefully this will lead to more targeted and effective enforcement. With regards to commercial debtors, creditors should look forward to a swifter enforcement regime simply because some of the previous safeguards embedded in the old poindings and warrant sales have been removed. Stephen Cowan Yuill+Kyle Debt Recovery+Credit Control Lawyers, Scotland scowan@yuill-kyle.co.uk 0141 572 4251 www.debtscotland.com | |||||
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