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Notes for Guidance - Bankruptcy (Scotland) Act 2016 (as amended)

This guidance describes the general functions of Accountant in Bankruptcy, interim trustees, trustees and commissioners in relation to their responsibilities regarding bankruptcies which started on or after 30 November 2016.

12.4 Other claim considerations

The trustee should have regard to Schedule 2 and 3 of the Act and consider the following.

12.4.1 Local authority claims

When a local authority makes a claim in a sequestration for unpaid council tax the trustee should confirm the period for which the unpaid council tax is due.

A full year’s council tax is payable from the start date of the council tax year. Therefore, a local authority may submit a claim for a full year’s council tax amount, regardless if the debtor was made bankrupt before the end of the council tax year.

Post-bankruptcy, a debtor may pay their council tax liability for a period included in the local authority’s claim. If this is the case the local authority should revise their claim accordingly prior to the trustee’s adjudication and distribution. Trustees should be aware that a reduction may be required to the claim prior to adjudication.

If a local authority has submitted a claim for a whole council tax year, this should remove the requirement for the debtor to pay council tax for that year. However, some local authorities do expect the debtor to continue to pay their council tax, regardless if a payment period is included in their claim. The trustee should establish if this is the case.

If council tax does not have to be paid by the debtor at any time during their bankruptcy the trustee should review the DCO calculation, as non-payment of council tax may increase the debtor’s surplus income from which an increased DCO contribution can be paid (see section 8).

12.4.2 Claims evidenced with a court decree

If a creditor presents a court decree as evidence of a debt the trustee has a responsibility to check that all funds recorded in the decree were due prior to the date of bankruptcy.

If the decree has been granted without the sheriff making any enquiry into the merits of the claim the trustee may examine the amount recorded in the decree, to be satisfied it was a valid claim. The trustee may consider rejecting all, or part of, a claim supported by a decree, if they do not agree the amount declared can be allowed under the adjudication process.

12.4.3 Student loans

Student loans provided under the Education (Scotland) Act 1980 and the Education (Student Loans) Act 1990, as amended by the Bankruptcy and Diligence (Scotland) Act 2007 (2007 Act), are not considered as an asset or a debt in bankruptcy. They are also not discharged once the bankruptcy ends.

The debtor would still have to make their monthly payment towards their loan if they are earning above the threshold. If the debtor is in arrears with their payments the collection of the arrears will be deferred until the debtor is discharged, or once their DCO is completed.

There is one exception to this ruling. If the loan was for the purposes of paying the graduate endowment it will still be discharged and the Student Loans Company will submit a claim. This will include any arrears due by the debtor. The Student Loans Company must cease to collect any contributions from the date the debtor is made bankrupt.

If further contributions are collected after this date the trustee may request that these are paid back to the debtor.

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