Everything you need to know about imminent changes to Bankruptcy and Diligence (Scotland) Act 2024

An update on the key changes coming into force on 25 June 2025.

The Bankruptcy and Diligence (Scotland) Act 2024 has come into force in stages. The Act introduces significant changes to the recall of sequestration process.

The first regulations commenced in January 2025 and included the introduction of a mental health moratorium, which will give people experiencing a serious mental health crisis temporary protection from debt recovery action. This will be set up via secondary legislation, for which the consultation closed in March 2025. It mirrors similar protections already available in England and Wales and brings Scotland in line with best practice.

Commencing on 25 June, the 2025 regulations laid out in the Commencement No.2, Transitional and Savings Provisions bring specific sections of the 2024 Act into force; directly amend parts of the Bankruptcy (Applications and Decisions) (Scotland) Regulations 2016; and clarify the process for recall of sequestration.

The key changes

From 25 June 2025 onwards, debtors applying for recall will follow an updated, more transparent process that’s been incorporated into the 2016 Act. The waiving of interest has been changed. If a debtor repays their debts in full within six months of the sequestration award, they no longer have to pay interest. This applies to new and existing awards, provided repayment occurs after 25 June 2025.

The regulations also provide a new framework for trustee resignation, particularly when a debtor isn’t co-operating or can’t be located. Trustees may now resign in these situations, and the Accountant in Bankruptcy (AiB) can be appointed as the replacement trustee. This new process has now been amended into the 2016 Act.

Regulation 9 of the Bankruptcy (Applications and Decisions) (Scotland) Regulations 2016 has been amended to remove ambiguity in the notification process when the AiB, acting as trustee, applies for recall. The 2025 regulations also introduce new statutory forms to support these procedural updates, such as trustee resignation and AiB appointment. These forms will be required under the modified 2016 Act from June onward.

The amendments enhance both fairness and administrative clarity, and they reflect ongoing efforts to modernise Scotland’s insolvency system while protecting vulnerable debtors. These regulations ensure that the wider bankruptcy framework functions smoothly once the June 2025 provisions of the 2024 Act take effect.

The impact of the 2024 Act

Improved accessibility and fairness: The Act enhances access to justice and fairness for debtors and makes provision for the establishment of a mental health moratorium. This introduces breathing space for individuals in crisis and reflects a more compassionate approach to debt recovery.

Removing the requirement to pay interest when debts are fully repaid within six months will make recall of sequestration more attainable, especially for those who act quickly and want responsible resolution.

Greater efficiency and clarity: The updated rules on trustee resignation, recall and AiB appointment fill in long-standing gaps and make the system more predictable and manageable.

The introduction of new statutory forms and revised procedures will also help reduce administrative errors and improve consistency in how cases are handled.

Enhanced confidence in the system: With a more reliable framework, there should be fewer delays and disputes. There will be broader public confidence in the insolvency process by ensuring that it is fair, proportionate and up to date.

Long-term modernisation: This legislation aligns the Scottish approach more closely with best practices elsewhere in the UK, while still respecting Scotland’s unique legal framework.

Why were the changes needed?

There were practical shortcomings in the existing law and broader social and policy shifts.

Dated procedures: The Bankruptcy (Scotland) Act 2016 provided a comprehensive framework, but parts of it were becoming dated. Processes like trustee resignation, recall of sequestration and debtor engagement weren’t always clear and efficient. This created inconsistencies in practice and occasionally led to procedural disputes or unnecessary delays.

Mental health gap: One of the clearest gaps was in protections for people with serious mental health conditions. Unlike England and Wales, Scotland had no formal mental health moratorium. This meant vulnerable individuals in crisis could still be pursued by creditor. This could potentially worsen their condition and undermine rehabilitation.

Stakeholder feedback: Feedback was received during public consultations, including responses from insolvency practitioners, money advisers, the third sector and the legal profession. Stakeholders called for greater clarity, streamlined processes and modern protections. The Scottish Government was clear that the law needed to reflect practical reality.

Encouraging early resolution: The six-month interest-free repayment window in recall cases will encourage debtors to repay quickly. This will benefit both them and their creditors and will help prevent financial exclusion.

 Alignment and modernisation: The changes support wider goals of modernising Scotland’s insolvency regime, making it more accessible and aligned with the best aspects of systems in England and Wales, while retaining our distinct legal structure.

These reforms aim to improve fairness, clarity and practical outcomes for everyone involved in the debt recovery process. The changes are a necessary response to issues raised by those working in and affected by the Scottish insolvency system.

Written by Ahsan Mustafa, a banking litigation associate at Aberdein Considine