A Sheriff has answered this question in the affirmative and given reasoning which will be helpful for trustees (under a trust deed) in considering whether to raise sequestration proceedings against the debtor.
Background
The Sheriff Court at Airdrie was asked in April 2019 to comment on the ability of a trustee under a trust deed to summarily apply for a debtor's sequestration in the case of David Mond v Craig Booth.
A breathing space scheme for individuals with problem debt will be implemented by 2021, the Treasury has confirmed. Draft regulations are expected later this year.
Lenders, loan servicers, debt purchasers and other acquiring funds can now begin taking steps to ensure that they are prepared for this change.
What is breathing space?
Whilst receiving a judgment in your favour may feel like the culmination of a potentially lengthy legal process, it may be just the first step (though an important one) on the path to financial recovery. In our latest insight, we look at how and when you can enforce a judgment to realise payment of any damages or costs which have been awarded.
What is enforcement?
A creditor who has a monetary judgment against a debtor (“the judgment debtor”) can obtain an order from the Court directing that an identified third-party (“the garnishee”) who owes money to the judgment debtor instead pay the money it owes to the judgment creditor, in full/ partial discharge of the judgment debt.
In a case with truly global implications, the Supreme Court of England and Wales held earlier today that judgments of U.S. Bankruptcy Courts against foreign defendants who had not submitted to the Bankruptcy Court’s jurisdiction were not enforceable in England and Wales in the case of Rubin v. Eurofinance SA.
Factual Background
Summary
The recent judgment of the Supreme Court in the joined cases of Rubin and another v Eurofinance SA and others and New Cap Reinsurance Corporation (in liquidation) and another v A E Grant and others [2012] UKSC 46, issued on 24 October 2012, established that judgments avoiding pre-bankruptcy transactions (“avoidance judgments”) made by non-EU foreign courts (including U.S. bankruptcy courts) have no special enforceability status in England and Wales compared to ordinary judgments.
- In the current economic climate personal insolvency is common place. According to the official figures, the number of personal insolvencies has risen from about 8,000 per quarter in 2002, to a peak of about 35,000 per quarter at the beginning of 2010. The current trend is a gradual reduction, the second quarter of 2012 seeing 27,390 personal insolvencies. In the last 12 months there have been 115,407 personal insolvencies: 35,456 bankruptcy orders; 30,816 debt relief orders; and 49,135 individual voluntary arrangements.
This article looks at some of the issues a lender should consider when a borrower or security provider is incorporated or has substantial assets outside England and Wales. The lender needs to know how this will affect its security and remedies, and the possible impact of insolvency procedures in relevant jurisdictions.
In Re JT Frith Limited [2012] EWHC 196 (Ch):
- the terms of an intercreditor agreement; and
- some unwitting help from the junior creditors,
enabled a senior secured lender to benefit indirectly from the prescribed part on the insolvency of its debtor.
Existing law at a glance
The Enterprise Act 2002 introduced the prescribed part under a new section 176A(2) of the Insolvency Act 1986. It reserves part of the floating charge recoveries for unsecured creditors.
Since then, the courts have held that:
The Scottish Government launched a consultation on the question of the reform of Scotland’s bankruptcy law earlier this year, and a lengthy and detailed consultation paper was released. Those of us who have heard the Accountant in Bankruptcy speak at conferences and the like over recent months eagerly awaited a discussion document which would reflect her guarded admission that things had perhaps swung rather too far in favour of debtors, and the time was right to try to redress that balance by looking towards the impact of debt on creditors.