Scottish Insolvency Practice 'Unfit For Purpose'

Scotland’s personal insolvency practice is "unfit for purpose", according to an insolvency specialist who spoke at Credit Today’s Credit Scotland conference.

Maureen Leslie, a partner at MLM Insolvency, said that the industry’s insolvency model had been designed for corporate insolvency and had "never been designed to cope with the masses of personal debt we currently face."

Leslie argued that the "repeated tinkering" to guidelines and practice to make the model fit has been ineffective, and the industry would have benefited from "standing back and doing a complete review."

However, Rosemary Winter-Scott, chief executive of Accountant in Bankruptcy – an agency of the Scottish government, said that it was the nature of Scottish government that prevented a full overhaul.

Winter-Scott said: "We have to get consensus across all parties and ensure that they agree to these changes - which is why decisions are made on smaller amendments rather than a complete overhaul."

Bryan Jackson, partner at accountant firm PKF, said the insolvency practice had originally been designed as a way to encourage entrepreneurialism, but the majority of insolvency has always been consumer debt, which has frustrated insolvency practitioners.

Winter-Scott pointed to new measures the government has set up to improve the personal insolvency sector including the low income, low asset bankruptcy scheme (LILA) and protected trust deeds (PTDs), which were beginning to address the problem.

LILA, which was introduced in 2007, allows a person with a debt over £1,500 to be declared insolvent using the Accountant in Bankruptcy rather than go to court, much like a debt relief order (DRO) in Britain. 

Winter-Scott also called on greater input from the entire industry, namely creditors, to help make decisions for future changes.

Posted at 10:00AM Mar 14, 2010 by Marc Stenton in Insolvency  |  Comments[0]