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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.

9.2 Unfair preference

Similarly, in terms of Section 99 of the Act, the trustee can raise a statutory action for reduction of an unfair preference provided the relevant transaction took place:

  • not more than six months before the date of bankruptcy
  • 12 months before the date of death in the case of a deceased debtor

An unfair preference is created if the debtor has made a payment to a creditor which was collusive and intended to prejudice the interests of the general body of creditors.

The only defences to a statutory challenge of an unfair preference are:

  • the transaction was in the ordinary course of trade or business
  • the payment in cash was for a debt which, when it was paid, had become payable
  • the transaction was one where parties had undertaken reciprocal obligations (whether performance of respective obligations occurred at the same or different times)
  • the granting of a mandate by the debtor authorised the arrestee to pay over arrested funds or part thereof to the arrestor
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