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Agenda: Scrap this clause that would serve poor and insolvent Scots badly

On Wednesday, the Bankruptcy and Debt Advice (Scotland) Bill will undergo its Stage One vote in the Scottish Parliament.

Clause four of the bill would break with almost 30 years of Scots law history by requiring a debtor in bankruptcy to make payments to his or her creditors over four years instead of three.

Not more time to pay; rather an extra 12 months of payments for a person lifting their head above the water for the first time in many years. Bankruptcy is a last-ditch remedy designed to provide rehabilitation and enable a fresh start for those in seriously unmanageable debt and financial meltdown.

The bill will give the Accountant in Bankruptcy, an agency of the Scottish Government, a new power to decide the level of payments in all cases by way of a "Debtor Contribution Order". But why make people in crisis pay more now?

Last year, the UK economy was in recession and our recovery this year was very slow, with Gross Domestic Product bumping along around 0.5% growth. In real terms, Scottish incomes and wages have been eroded by inflation, the cost of living has increased, fuel costs have increased by more than 10% year on year, and UK austerity measures have seen a massive cut to public services and welfare benefits.

Why change Scots law to make those in financial crisis pay more and pay longer? Govan Law Centre (GLC) believes clause four of the bill is ill-considered and-ill advised. It presents a solution to a problem that does not exist. It has no support from the Scottish advice sector, and even most creditors do not support it.

It will mean Scots have to pay longer than anyone else in the UK, resulting in a greater likelihood of defaults. It is widely accepted in the Scottish personal insolvency industry that the longer payment programmes last, the greater the level of attrition those plans produce. Essentially, you are expecting people to live without disposable income, with only enough to pay essentials. Long term, that is unsustainable as cars break down, shoes need replaced, kids require new school clothes and boilers need replaced.

Making Scots experiencing financial crisis pay more over four years equates to greater hardship. Last month's "Maxed Out" report examined the impact of problem debt and found: "The costs to those affected, in stress and mental disorders, relationship breakdown and hardship is immense. But so too is the cost to the nation, measured in lost employment and productivity and in an increased burden on public services".

Scotland's laws on bankruptcy were designed in 1985 to provide respite and relief for citizens in financial crisis; an opportunity to get their life back on track. Why is Scotland's Government proposing to punish debtors when we ought to help them? A recent Money Advice Service survey confirmed that Scotland has some of the worst debt blackspots in the UK, with 30.9% of people in Inverclyde in debt, 29% in Glasgow, 28.8% in Dundee, 27.6% in Easy Ayrshire and 26.9% in West Dunbartonshire.

I can see no case to force Scots in financial crisis to pay more and be longer in bankruptcy, particularly at a time of austerity when families are struggling to make ends meet. To compound matters, the bill would also replace the helpful Low Income Low Asset expedited form of bankruptcy with a new procedure with a £10,000 debt level cap. This will exclude many Scots with no assets and push them into a four year repayment plan through ordinary bankruptcy. Alternatively it will exclude them from debt relief exposing them to ongoing debt collection, none of which makes any sense.

Forcing poor and insolvent Scots to pay more over a longer time for the lifeline bankruptcy provides is a regressive and mean-spirited policy the Grinch would shirk at. I hope the Scottish Government will reconsider this departure from 30 years of Scots law history. Govan Law Centre will launch a broad-based campaign to scrap clause four, so that impecunious Scots in financial crisis are not punished at a time when they need help.

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