Third Party Arrestment, including Bank (Scotland)
An arrestment allows a creditor to seize a debtor's moveable property, such as funds or goods held in storage, where that property is in the possession of a third party. For example, arrestment can be used against money held in a debtor's bank account(s).
A creditor must have a decree (or relevant document of debt) before proceeding with arrestment. Unlike other diligences, for most creditors, there is no requirement to serve a Charge for Payment prior to using this diligence. However if the creditor is a public creditor, such as a local authority or Her Majesty's Revenue and Customs, and they have pursued the debt through a special abbreviated court process known as summary warrant, a charge must still be served.
The creditor must ask a Sheriff Officer to serve a schedule of arrestment on the third party (the arrestee) which prevents the arrestee releasing funds and goods held to the debtor. Where funds are attached as a result of the arrestment, the amount arrested is limited to either, the amount the arrestee holds for the debtor, or the total amount (including all charges, expenses and interest) due to the creditor, whichever is less. Where arrested funds are insufficient to cover the whole amount owed and the arrestee also holds goods belonging to the debtor, then all of those goods are also arrested, regardless of value.
The arrestee has a statutory duty to send the creditor, the debtor and anyone else who has claimed ownership of the funds or goods, a form of disclosure within three weeks from the date the arrestment schedule was served. The form of disclosure details the nature and value, as far as it is known, of the items arrested.
If funds held by a bank or any other financial institution are arrested, there is a minimum amount which is protected from the arrestment. This is known as the protected minimum balance and only the balance above that sum can be arrested. The protected minimum balance for funds held by financial institutions from 6 April 2016 is £494.01.
Where funds are arrested, they are automatically released by the arrestee to the creditor 14 weeks after the date the arrestment is carried out. The debtor can also choose to give written authority (called a 'mandate') for the arrestee to give arrested funds or goods to the creditor sooner.
The automatic release of funds will not take place in cases where an objection has been lodged. The debtor, arrestee or any other interested party has the right to lodge a notice of objection by making an application to the sheriff, after which a hearing will be held. If the objection is upheld, the sheriff can order the arrestment to be restricted (in which case only part of the funds are given to the creditor) or recalled (where the funds are restored to their original position).
Where goods have been arrested, and the debtor has not signed a mandate, the creditor must raise an action of furthcoming with the court. An action of furthcoming is an application to the court to authorise the release of funds or goods to the creditor.
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