How Is A Debtor Contribution Order Calculated In Sequestration?
From your budget, not from your debts. Regulation 15(2) of the Bankruptcy (Scotland) Regulations 2016 makes the contribution your whole surplus income above the lower of the published trigger figures and what you actually spend.
There is no percentage anywhere in the calculation. The assessment produces all of the assessed surplus, which is why the expenditure side is worth getting right.
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Free, confidential and no obligation.Every commercial page in this market names the common financial tool and then stops. This one sets out the steps, the protections built into them, and the deadlines for challenging a figure.
An order is made in every sequestration, including the ones where the answer is nil. How sequestration works covers the process it sits inside.
What is the common financial tool and where does it come from?
It is a method specified in regulations. Section 89 of the Bankruptcy (Scotland) Act 2016 lets Scottish Ministers specify it, and regulation 15 of the 2016 Regulations does so.
The name most pages give it is the wrong one for Scotland
The prescribed tool is the Common Financial Statement, under regulation 15(1) of the Bankruptcy (Scotland) Regulations 2016.
Most sources name the Standard Financial Statement, which is the tool used elsewhere in the United Kingdom. Regulations that would have moved Scotland to it were drafted in 2018 and never made.
The Accountant in Bankruptcy publishes its own page on the common financial tool, and the trigger figures themselves are published as part of the statement rather than in the regulations.
Where the tool is used
Section 90(3) requires the Accountant in Bankruptcy to use it when making the order, and section 95(2) requires the trustee to use it when varying or quashing one.
The same tool is used in a protected trust deed, which is one reason the two solutions produce similar monthly figures for the same household. In a Minimal Asset Process the order is fixed at zero.
How does the trustee work out your surplus income?
A debtor contribution order is set using the common financial tool, so it is calculated from what your budget shows you can afford rather than from what you owe.
The eight steps, in the order they happen
| The step | What happens | Where it comes from |
|---|---|---|
| 1. Income is totalled | Everything you receive is gathered, including wages, a pension in payment and other regular sums | Section 89 and regulation 15 |
| 2. Expenditure is set out | Your actual spending is recorded against the categories in the Common Financial Statement | Regulation 15(1), which prescribes the common financial tool |
| 3. Trigger figures are applied | Each category is compared with the published trigger figure for reasonable expenditure | Regulation 15(2) |
| 4. The lower figure wins | The assessment uses the lower of the trigger figure and your actual expenditure for that category | Regulation 15(2) |
| 5. Protected items are allowed | Guaranteed minimum pension income, aliment, a periodical allowance and child support maintenance | Section 89(3), (4) and (5) |
| 6. A contingency allowance is added | You must be allowed to decide to retain one, and it is capped at up to 10 per cent of the assessed contribution | Regulation 15(3)(b), with the cap in regulation 16(1) |
| 7. The surplus becomes the contribution | The whole of your assessed surplus, with no percentage applied to it | Regulation 15(2) |
| 8. Nil cases are identified | No contribution is due where your income is solely social security benefits and tax credits | Regulation 15(7) |
Why the lower figure rule is the one to understand
Where you spend less than the trigger figure in a category, regulation 15(2) uses what you actually spend. Where you spend more, the trigger figure caps it unless the extra is accepted as reasonable.
So accurate paperwork changes the answer in both directions. Bank statements, bills and receipts are the evidence behind every line of it.
Nil is a real outcome, not a failure
Regulation 15(7) provides that no contribution is due where your income is solely from social security benefits and tax credits, and section 90(4) expressly allows an order to fix the contribution at zero.
That is the normal position in a Minimal Asset Process. Whether you pay anything during a MAP covers it.
Money already coming out of your wages? Get free help
Free, confidential and no obligation.What expenditure can be allowed above the trigger figures?
More than most people put forward. The discretion is real and it is where a money adviser earns their place.
The discretion in regulation 15(3)
Regulation 15(2) is expressly subject to paragraph (3). Regulation 15(3)(a) lets the Accountant in Bankruptcy, the trustee varying or removing an order under section 95, the court or a trust deed trustee allow expenditure above a trigger figure where satisfied it is reasonable.
Higher travel costs where there is no practical bus route, a medical or dietary need, or childcare with no cheaper alternative are the sorts of things put forward. Evidence carries them, not assertion.
The items the Act protects outright
Section 89(3) requires reasonable expenditure to be not less than any guaranteed minimum pension income, and section 89(4) and (5) require an allowance for aliment, a periodical allowance to a former spouse or civil partner, and child support maintenance.
Regulation 15(3)(b) separately requires that you be allowed to decide to retain an amount towards contingencies, and regulation 16(1) caps it at up to 10 per cent of the assessed contribution, subject to a cash maximum.
So the allowance is one you must be offered, not one you can name your own figure for. How pension income is treated deals with the pension side in detail.
Bring the evidence, not the argument
A bus timetable, a letter from a consultant or a childcare invoice does more than a paragraph of explanation. Regulation 15(4) requires evidence of why the expenditure is reasonable to be provided, or supplied by you on request.
Where an item is refused, ask why in writing. The reason is what a review would turn on later.
The incentive is bigger than people realise
Because the assessment takes the whole surplus rather than a share of it, every pound accepted as reasonable expenditure is a pound off the monthly payment. That is a stronger reason to get the figures right than in almost any other debt solution.
Who makes the order, and when does it take effect?
The Accountant in Bankruptcy makes it, and section 90(1) says it must, in every sequestration of a living debtor.
The timetable
| The stage | What happens | Where it comes from |
|---|---|---|
| The order is made | At the same time as the award on a debtor application | Section 90(1)(a) |
| On a creditor petition | The trustee sends initial proposals within 12 weeks of the award, a period substituted on 29 March 2021 | Section 90(2) |
| Before it takes effect | Not before the expiry of 14 days beginning with the day you are notified | Section 90(9) |
| The payment period | 48 months beginning with the date of the first payment | Section 91(2)(a) |
| A shorter period | Where the person making or varying the order determines one | Section 91(2)(b) |
| A longer period | Where payments were missed, or where you and the trustee agree | Section 91(2)(c) |
| After your discharge | The requirement to pay applies irrespective of it | Section 93(2) |
Note the payment period runs from the date of the first payment rather than from the award. How long a sequestration lasts sets that against the other clocks in a case.
It outlasts your discharge, and that is by design
It normally runs for 48 months, which is longer than the twelve months to discharge. The payments carry on after you are discharged.
Section 93(2) states that the requirement to pay applies irrespective of the debtor’s discharge, so a twelve-month discharge can leave around three years of payments still to run.
That is the single most misunderstood point in Scottish bankruptcy. Whether discharge ends everything at twelve months sets out what else carries on.
Can you get a payment break if things get worse?
A payment break of up to six months is possible, but it is not available on request. Section 96 requires your disposable income to have fallen by at least half, because of one of seven listed changes in your circumstances, and the decision is still a discretionary one.
The three conditions, and all of them have to be met
Section 96(3)(a) requires a reduction of at least 50 per cent in your disposable income, as determined using the common financial tool, caused by one of the circumstances listed in section 96(4).
Section 96(3)(b) allows one application per debtor in a sequestration. Section 96(6) then leaves it to the trustee, who grants it only where a payment break is fair and reasonable.
The seven listed causes
| The circumstance | Where it comes from |
|---|---|
| A period of unemployment, or a change in employment | Section 96(4)(a) |
| Leave from employment because of the birth or adoption of a child | Section 96(4)(b)(i) |
| Leave from employment because of the need to care for a dependant | Section 96(4)(b)(ii) |
| A period of illness of the debtor | Section 96(4)(c) |
| A divorce | Section 96(4)(d) |
| A dissolution of civil partnership | Section 96(4)(e) |
| A separation from a spouse or civil partner | Section 96(4)(f) |
| The death of a person who cared for a dependant of yours along with you | Section 96(4)(g) |
The list is exhaustive. A fall in income from a cause outside it does not open the payment break route, however severe it is.
A break extends the order rather than shortening it
The break is a deferral of up to six months and section 96(9) adds it to the payment period. You pay the same total over a longer time.
Where the cause falls outside the list, the route is a variation instead. What a trustee in sequestration does covers who decides what.
What happens if you do not pay your contribution?
Your employer can be instructed to deduct it. Section 94 gives the trustee that power once two payment intervals have gone unpaid.
The threshold is precise
Section 94(4) requires both a failure to comply with the requirements imposed on you and a failure to pay the contribution in respect of two payment intervals. Until then the contribution is something you pay yourself.
The person paying your income may charge a fee equivalent to the employer’s fee for operating diligence against earnings, and deduct it from the balance due to you. Regulation 20(5) of the 2016 Regulations sets that up.
It is not a wage arrestment
An earnings arrestment works off fixed statutory tables and takes no account of what you spend, and an award of sequestration ends one anyway. What sequestration does to diligence explains that.
Non-payment can reach your discharge as well
The categories the Accountant in Bankruptcy uses when it defers a discharge come from its own notes for guidance rather than from the Act.
Talking to the trustee before arrears build is the whole answer here. Which debts are not written off covers what a discharge does and does not reach.
How do you challenge or change the figure?
Two routes, with short deadlines. One attacks the order itself and the other follows a change in your circumstances.
Reviewing the order itself
Section 92 provides the review and appeal machinery, and applying for a review suspends the order in the meantime.
| The step | The deadline | The detail |
|---|---|---|
| Apply for a review of the order | Within 14 days | The order is suspended meanwhile |
| Representations by other interested parties | Within 21 days | They go to the Accountant in Bankruptcy |
| The review decision | Within 28 days | Made by the Accountant in Bankruptcy |
| Appeal to the sheriff | Within 14 days of the decision | The end of the line for the order itself |
| A variation, quashing or payment break decision | The same timetable | Section 97 rather than section 92 |
Varying it when your circumstances change
Section 95 lets the trustee vary or quash the order on your application following a change, or where the trustee thinks it appropriate. A trustee-initiated variation does not take effect for 14 days.
Tell the trustee as soon as something changes rather than waiting for arrears. National Debtline and the other free advice agencies will put the request together with you at no charge.
Get the assessment right the first time
Money advice from an approved adviser is a statutory requirement before a debtor application, so the first assessment happens with help built in. How to apply for sequestration sets out the order it happens in, and a trust deed against sequestration compares what the same budget produces on each route.
Frequently asked questions
What percentage of my income goes into a debtor contribution order?
There is no percentage. Regulation 15(2) takes your whole surplus income above the lower of the trigger figures for reasonable expenditure and your actual expenditure, so the answer is all of the assessed surplus.
What is the common financial tool in Scotland?
It is the assessment method specified under section 89 of the 2016 Act and regulation 15 of the 2016 Regulations. Regulation 15(1) prescribes the Common Financial Statement, and the 2018 attempt to move Scotland to the Standard Financial Statement was laid twice as a draft and never made.
Do I pay anything if I am on benefits?
Regulation 15(7) provides that no contribution is due where your income is solely from social security benefits and tax credits. Section 90(4) separately allows an order to be fixed at zero.
How long does a debtor contribution order last?
Section 91(2)(a) sets the payment period at 48 months beginning with the date of the first payment. It can be shorter where that is determined, or longer where payments were missed or you and the trustee agree.
Do contributions stop when I am discharged after twelve months?
No. Section 93(2) says the requirement to pay applies irrespective of your discharge, so an order made at the award can still have around three years to run when discharge comes.
Can my employer be told to deduct the payments?
Yes, under section 94, once you have failed to comply and have failed to pay the contribution in respect of two payment intervals. The payer may charge a fee equivalent to the employer’s fee for operating diligence against earnings.
Can I take a break from paying?
Only on the statutory conditions. Section 96 needs a fall of at least 50 per cent in your disposable income caused by one of seven listed changes, you can apply once, and the trustee still has to think a break fair and reasonable.
Can I challenge the amount I have been told to pay?
Yes. Section 92 gives a review and appeal route against the order, with 14 days to apply, and the order is suspended while the review runs.
Related guides
- Does Discharge From Sequestration End Everything After 12 Months? What discharge releases, what keeps running afterwards, how the trustee's own discharge differs, and when yours can be delayed.
- How Long Does Sequestration Last In Scotland? When discharge comes, why twelve months is a decision rather than a date, what carries on afterwards, and how long the record lasts.
- Does Sequestration Stop Sheriff Officers And Other Diligence? What an award ends, what a moratorium does before it, which debts can still be enforced, and what replaces the deduction.
- Which Debts Are Not Written Off By Sequestration In Scotland? The short statutory list discharge never touches, where student loans and aliment sit, and what happens to a secured debt.
- What Happens To Your Pension In Sequestration In Scotland? Which pensions stay out of the trustee's reach, what happens to income you already draw, and how a lump sum is treated.
- What Does A Trustee In Sequestration Do? Who acts as your trustee, the section 50 duties, what happens to the things you own, and when the trustee's job finally ends.
- How Does Sequestration Work In Scotland? The three routes in, who becomes your trustee, what you pay, what happens to the things you own, and what discharge does not clear.
- Do You Have To Make Payments During MAP Bankruptcy? Why a contribution order is made at zero, what happens if your income improves during the six months, and which debts you still have to pay.
- Which Is Better, A Trust Deed Or Sequestration In Scotland? How the two compare on qualifying, your home and car, cost, length, credit file, and which one stops a wage arrestment sooner.
- How Do You Apply For Sequestration In Scotland? Which debtor application you qualify for, why a money adviser comes first, what it costs, and what the Accountant in Bankruptcy does next.
Written as general information about Scottish debt law rather than regulated financial or legal advice, and your own circumstances may change the answer. Free, impartial help is available from Citizens Advice Scotland, StepChange, National Debtline and Advice Direct Scotland.