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

An alienation may be deemed to be gratuitous if it involves a voluntary transfer by the debtor of any property, or right, to another person for no valuable consideration or for a consideration which was of significantly less value than the transferred asset.

The statutory challenge is available provided the alienation was effective on:

• a date within five years of the date of bankruptcy; or
• of the debtor’s death in the case of a deceased debtor; and
• if the alienation was to an associate of the debtor, as defined in Section 229 of the Act

If the alienation was to a person who is not an associate of the debtor, the time limit is two years prior to the date of bankruptcy etc.

The only defences to a statutory challenge of a gratuitous alienation are:

• immediately, or at any time since the date of the alienation, the debtor was absolutely solvent
• the alienation was for adequate consideration
• the alienation was a reasonable birthday, Christmas or other conventional gift
• the alienation was a reasonable charitable donation made to a person who was not an associate of the debtor

In a statutory challenge the burden of proof is on the person seeking to uphold the transaction. When the statutory challenge is not available, a challenge of common law remains possible but here the burden of proof rests on the challenger.