In the 1970s, Margaret Thatcher was accused of being a “milk snatcher” when she attempted to end free milk in schools for all over sevens. It was a name that haunted her for the rest of her career.

It would be a sad indictment on the Scottish Government, so soon after they passed the Child Poverty (Scotland) Act 2017, if they were now to acquire a new moniker of being the “Maintenance Snatchers”, but the recent approach of the Accountant in Bankruptcy (AiB) to child maintenance appears to make this inevitable.

It appears the Accountant in Bankruptcy has recently received legal advice that when assessing how a debtor’s contribution in bankruptcy is calculated any maintenance for a Child must not only be used in making that calculation, but is also available to take a contribution from.

This is despite Scottish and UK legislation clearly stating otherwise, but as legal opinions are never made public, it’s unclear how the AiB are reaching the conclusions they are.

Debtor Contributions in Bankruptcy

In Scotland when you apply to enter a formal debt remedy, like sequestration (bankruptcy), a Protected Trust Deed or a Debt Payment Programme under the Debt Arrangement Scheme, the first step you must take is to complete a Financial Statement.

A financial statement has two parts to it, the first shows your income and expenditure, the second part shows your assets and liabilities .

The reason for this is both parts perform two separate solvency tests. The first, is known as the “pay your debts as they fall due” test. This looks at whether, once all your essential expenditure has been allowed for, you have sufficient disposable income left to make the minimum contractual payments due on your debts. If you don’t, this is known as “practical insolvency” and basically means you cannot pay your debts as they fall due.

The second part is known as the “balance sheet test” and compares all your assets with your liabilities. This is to see if your liabilities outweigh you assets, and can be useful to see if you have any non-essential assets that could be used to pay off your debts.

If your assets are outweighed by your liabilities, then this known as “absolute insolvency” (you owe more than you own).

Where you fail the practical solvency test, this allows the AiB to see what you can pay. In the case of a bankruptcy this payment, known as a contribution, then has to be paid for 48 months.

However, in drafting a financial statement, the AiB will look at all the income coming into a household, including child maintenance money, which is reasonable as child maintenance money is supposed to pay for the maintenance of a child, so should contribute to the costs of feeding them, housing them and clothing them.

However, what happens when there are funds left over after the household expenditure and some of this can be identified to being made up of some of the child’s maintenance money? The current view of the AiB is that can be used to pay the parent’s contribution towards their debts

Example:
Take the case of a single parent. She is in receipt of Employment Support Allowance, Child Benefit and Child Tax Credits. She also receives child maintenance from her child’s absent Father.
It is not disputed that no contribution can be taken from the Mother’s benefits, as these are “inalienable” in law. However, if there is a surplus left over once all the family’s reasonable expenditure has been calculated, can this be taken?

It would appear the AiB’s legal advice states they can, providing it is equal to or less than the total amount the Mother received in child maintenance (as, therefore, it cannot be coming from her benefits).

Whose Income is It?

Section 1 (1) of the Family Law (Scotland) Act 1985 (Obligation of Aliment) states:

(1)From the commencement of this Act, an obligation of aliment shall be owed by, and only by—
(c)a father or mother to his or her child;

It is, therefore, clear the obligation to pay maintenance is one owed by the absent parent to the child, not to the guardian parent.

Likewise, in terms of the Child Support Act 1991:

Section 1: For the purposes of this Act, each parent of a qualifying child is responsible for maintaining him.

Again this clearly suggests the obligation to pay maintenance is owed by the absent parent to the child, not to the other parent.

Furthermore, if you consider section 7 of the Child Support Act it states:

Right of child in Scotland to apply for assessment
(1) A qualifying child who has attained the age of 12 years and who is habitually resident in Scotland may apply to the Secretary of State for a maintenance assessment to be made with respect to him if—

This further suggest that child maintenance income belongs to the Child and not the parent, if they themselves can request a maintenance assessment when they turn 12.

Contributions from Income of Children

It is clearly wrong the idea that where a child is paid an income, even if that income is paid to their parent as their guardian, that income should be considered to be available by a government agency to pay the parent’s debts.

It is one thing to say it can be used in drafting a financial statement for the household, as clearly many of the expenditure items in the financial statement will relate to the child’s maintenance, which is clearly the purpose of the income. However, to say where there are surplus funds and some of those funds are identifiable as child maintenance, a contribution can be taken from it, does not only appear to be legally wrong, but morally akin to being a “milk snatcher”.

If you want to share your experiences of how child maintenance has been treated in a formal debt solution in Scotland, you can contribute to our Forum.