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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.

7.6 Repayments and refunds – post bankruptcy

It is the Accountant’s view that repayments and refunds can and should be regarded as acquirenda and section 78(11) of the Act is available to any party who holds a dissenting view to make an application to the sheriff.

The Act does not define what is meant at Section 85(1) of the Act by income of whatever nature. What is known, however, is that it does not include any estate, property or right which has vested in the trustee.

When deductions have been made, or expenditure incurred, e.g. payment to a post-bankruptcy creditor, from a debtor’s income and it later becomes known the deductions were too great or that certain sums were overpaid to a creditor, a right arises in the person of the debtor - a right of recovery. It is The Accountant’s view that this right of recovery is acquirenda, i.e. estate vesting in the trustee under Section 86(11) of the Act.

For estate to vest under Section 86(11) of the Act it is necessary that:

  • is acquired by the debtor on a relevant date and;
  • it would have vested in the trustee if it had been part of the debtor’s estate on the date of bankruptcy

It is the opinion of the Accountant if, at the date of bankruptcy, the debtor had a right of recovery in respect of overpaid tax, or miss-sold or miss- applied bank policies or charges, the right would vest in the trustee and remains vested in the trustee until the expiry of four years after the date of bankruptcy, see section 78(10) of the Act.

The right is not a right to income as such. It is a distinct right relating to the repayment of excess deductions made by, for example, HMRC or a bank. The nature of that right does not vary with the time at which it arises.  Thus, if the excess deductions of tax, or charges, have been made after the date of bankruptcy, the debtor’s right remains just that, a right to repayment not a right to income. This right to repayment appears to the Accountant to satisfy Section 86(11) of the Act for the purposes of estate vesting in the trustee.

It is the Accountant’s view that the same principle applies to any post- bankruptcy creditor who had been overpaid by the debtor. A right of recovery would arise.

HMRC are in a different position from other post-bankruptcy creditors in that they can make deductions directly from the source of the debtor’s income whereas other post-bankruptcy creditors are paid by the debtor.

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